In a post-election boost, the November NFIB Small Business Optimism index jumped eight points, a rather large one-month move, to 101.7. That’s the highest since June 2021. I'm not sure if this survey on small business is going to make it into the deliberations at the Federal Reserve. But it should, observes Peter Boockvar, editor of The Boock Report.
Where the lift was most notable was in the outlook as the “Expect Better Economy” component spiked to +36% from -5%. Also, “Expect Higher Sales” went from -4% to +14% and “Good Time to Expand” rose eight points to 14%.
Capital spending plans rose by six points to 28%, the most since January 2022. There was also a three-point gain in “Plan to Increase Inventory.”
On the labor market, there was a three-point rise in “Plan to Hire” to 18%, matching the highest since May 2023, and a five-point increase in compensation plans to 28%, the highest since December 2023. “Positions not able to fill” rose one point.
The earnings trend gained seven points to -26% and credit conditions eased by one point. There was a three-point rise in “Higher Selling Prices” to a five-month high. Lastly, the average interest rate paid on a loan fell to 8.8% from 9.7%.
How can the Fed cut interest rates next week in the face of this burst of economic optimism post-election, whether that optimism is realized or not? Shouldn't the Fed at least take a pause and wait and see?
Yes, they should.
