The Small Business Administration (SBA), Office of Advocacy, just reported that the U.S. economy rebounded in the fourth quarter, with real GDP growing by an annualized 5.7 percent. Meanwhile, unemployment remained high, and small business owners and the public were cautiously optimistic.
Here are the trends that they are reporting:
- The U.S. economy rebounded in the fourth quarter; real GDP grew by an annualized 5.7 percent. Much of this growth stemmed from inventory replacement. Other contributing factors were growth in real personal consumption (2 percent) and real exports (18.1 percent) and slowing growth of imports (10.5 percent, all at annualized rates). Both the Federal Reserve’s industrial production index and the Institute for Supply Management’s manufacturing composite index reflected strong growth during the quarter.
- Unemployment remained high, ending the year at 10 percent. The economy lost 310,000 net jobs during the quarter and 4.8 million during 2009. The overall pace of net job loss slowed somewhat, and the service sector showed signs of a turnaround. Net job gains occurred in professional and business services, education and health services, and natural resources and mining. Nonfarm labor productivity rose an annualized 6.2 percent, suggesting that those who were employed were working harder. Self-employment for 2009 was down slightly from recent years.
- Small business owners and the public were cautiously optimistic. Both the University of Michigan’s consumer sentiment survey and the National Federation of Independent Business’s small business optimism index ended the year at higher levels than their 2009 averages, reflecting stronger confidence in the economy. However, small business owners remained tentative about business expansion and hiring, with lingering concerns about poor sales, access to credit, and other issues.
- Interest rates stayed historically low, while small business credit issues persisted. The Senior Loan Officers’ survey reported continued weakness in small firm demand for commercial and industrial loans. Meanwhile, small businesses cited a lack of credit as one of their chief problems. SBA-guaranteed lending remained a bright spot, with the average 7(a) lending in the fourth quarter up 144 percent over the dollar value of loans in the first quarter; for 504 loans, the increase was 87.8 percent. (The end-of-year volatility shown in full report stems from very high monthly totals in September and November.) The number of venture capital deals rose steadily throughout 2009, but the overall volume was significantly off the 2008 level.
- Consumer prices rose modestly. The consumer price index rose at a 3.3 percent annual rate; when food and energy costs are omitted, consumer prices increased an annualized 1.3 percent. Producer prices rose at a much faster rate (an annualized 8.3 percent), suggesting that firms have been unable to pass along higher costs to their customers. Employers increased wages, salaries, and benefits modestly between fourth quarter 2008 and 2009. Oil prices rose $5 a barrel in the quarter and $33 in 2009.
Those interested in detailed descriptions of small business indicators can visit the SBA Website for a full report (pdf format).
If you would like to contact me, you can do so by emailing me at mike.clough@bestbizpractices.org or visiting my LinkedIn page.
Posted by: Mike Clough
