Small business owners says qualified workers remain the major stumbling block to expansion. Nonetheless, U.S. business owners expressed optimism in July as expectations for business conditions, real sales, and expansion made solid gains.
The optimism flies in the face of a global economic recession most likely underway as the yields on short-term U.S. bonds is well above long-term bonds for the first time in 12 years. Coupled with an inverted yield curve and a nasty trade and currency war, the possibility of painful and prolonged downturn is even more likely.
The NFIB reports its Small Business Optimism Index rose 1.4 points to 104.7, with seven of 10 components advancing, two falling, and one remaining unchanged. The Uncertainty Index fell 10 points, reversing a surge in June that reached the highest level since March 2017.
Small Business Owners Optimism
The NFIB found small business owners’ plans to create new jobs and make capital outlays advanced and earnings trends improved, supported by a solid improvement in sales trends; plans to order new inventories posted a solid gain; after surging last month, reports of higher average selling prices stabilized, with no evidence of a pickup in inflation; and credit conditions remain very supportive, interest rates on loans are historically low, and there are few complaints about credit availability.
“Small business owners want to grow their operations, and the only thing stopping them is finding qualified workers” says NFIB President and CEO Juanita D. Duggan.
When it comes to business credit only 3% of owners reported that all of their borrowing needs were not satisfied. Twenty-eight percent reported that all credit needs were met, and 56% said they were not interested in a loan. Two percent reported that their last loan was harder to get than the previous one. Credit conditions are about as supportive as they have ever been in the 46-year NFIB survey history.
As reported in the NFIB Jobs Report, business job creation slowed in July, falling to an average addition of 0.12 workers per firm. A record 26% of small business owners surveyed cited the difficulty of finding qualified workers as their single most important business problem.
But Recession is Here
While Wall Street is historically miles ahead of Main Street, spending data on payment cards is even further ahead. The second-quarter data show global gross dollar volume (GDV) on credit, debit, charge, and prepaid cards declined slightly and has been stalling for the past three quarters.
It does not take a rocket scientist to add an inverted yield curve with trade tariffs, currency devaluations, weakening global spending, a stratospheric deficit, and rising gold prices to conclude we are already in a recession, notes Robert McKinley, Senior Analyst for CardTrak, CardFlash, and CardData.
Crazy as it might sound, another indicator is a consumer credit bubble just ahead of a recession. In April and May Americans added more than $14 billion to revolving consumer credit, after floundering for many months and dropping off the cliff in June with negative growth. This same pattern appeared just before the Great Recession.
Global Card Usage Bellwether
Second-quarter global volume on a currency adjusted basis (FX) for the Major 4 U.S. based networks was essentially flat year-on-year (YOY) down by 10 basis points (bps), compared the prior year, based on analysis by RAM Research.
Global payment card (credit+debit+charge+prepaid) GDV for Visa [V], Mastercard [MA], American Express [AXP] and Discover [DFS] payment cards decreased to 8.5% YOY FX for the second-quarter (2Q/19), compared to 8.6% YOY FX in the year ago quarter.
Visa reported a 6.2% YOY FX gain in global GDV and a 2.2% YOY NFX (not currency adjusted) gain for the second-quarter, compared to an 8.8% YOY FX and a 10.3% NFX increase in 2Q/18.
Mastercard reported an 12.9% YOY FX gain in global GDV and an 8.3% YOY NFX gain for the second-quarter, compared to a 14.1% YOY FX and a 15.3% NFX increase in 2Q/18.
U.S. Consumer Credit Splurge
U.S. revolving credit, mostly credit card debt, edged down by 0.1% or 10 bps (basis points) in June, compared to a revised 8.4% year-on-year (YOY) gain in May and a revised 7.6% YOY increase in April. The monthly gains for April and May were the highest in more than five years.
On a quarterly basis, U.S. revolving consumer credit grew 5.3% YOY in the second-quarter (April-Jun), compared to a revised 1.5% YOY gain in the first-quarter, and compared to a revised 3.2% YOY increase for the same period one-year ago, according to the latest Federal Reserve report.