The Small Business Economic Trends (SBET) survey is a monthly assessment of the U.S. small business economy and its near-term prospects. Its data are collected through mail surveys to random samples of the National Federal of Independent Business (NFIB) membership database of approximately 300,000 firms each month. NFIB is the largest small business trade association in the country with members in every state and every industry grouping. The SBET survey has proven to be a reliable gauge of small business economic activity over time.

The SBET survey was first mailed out in October 1973 and was issued quarterly until January 1986, when it became a monthly publication. The survey’s questionnaire has remained essentially unchanged throughout its history in order to preserve the integrity of the time series data. The survey contains questions related to recent performance, near-term forecasts, pricing behavior, and demographics. The topics include: economic outlook, sales, earnings, employment, employee compensation, investment, inventories, credit conditions, and single most important problem.

Click here for a current copy of the SBET survey questionnaire.

The Index of Small Business Optimism

The Small Business Optimism Index is constructed as an equally-weighted average of ten variables (seasonally adjusted) from the SBET survey. The Index provides a monthly summary data point for the state of the small business economy. It is a coincident indicator of the national economy, though it also offers direction for the small business sector’s immediate prospects. The ten indicators include: good time for business expansion, general economic outlook, expected sales, current earnings, planned capital outlays, current job openings, hiring plans, current inventory satisfaction, expected inventory change, and expected credit conditions. These indicators were selected because they were forward looking or supportive of hiring and spending. Outlook for expansion, job openings, and capital expenditure plans are expressed as a percent of the sample. The remaining seven components are expressed as net percentages (the percent of owners giving a favorable response minus the percent responding unfavorably).

Methodology

The ten components are seasonally adjusted, summed, divided by 10, and added to 100. The Index is based to its average value in 1986 (1986=100), the middle of the 1980s expansion and beginning of the monthly NFIB time series. To set a base year of 1986, the Index value in each month or quarter is divided by its average value in 1986. Because this is simply dividing all observations by a constant, any base year can be selected. The year 1986 was chosen because of the transition to monthly surveys and the year was not unusual (boom or recession), it was a solid growth year for the economy.

Index = ((Hire + JobOp + Credit + BusCond + Sales + Earnings + InvSat + InvChange + Expand + Capex) / 10) + 100

    Hire: Percent who plan in increase their number of employees minus those who plan to decrease in the next three months

    JobOp: Percent with a position they are currently not able to fill

    Credit: Percent who think that credit conditions will be easier minus those who think credit conditions will be harder during the next three months

    BusCond: Percent who think general business conditions will be better minus those who think it will be worse six months from now

    Sales: Percent who think sales will be higher minus those who think sales will be lower during the next three months

    Earnings: Percent who report higher earnings minus those who report lower earnings in the last three months compared to the prior three months

    InvSat: Percent who report that their inventories are too low minus those who report their inventories are currently too large

    InvChange: Percent who plan to increase inventories minus those who plan to decrease inventories in the next three to six months

    Expand: Percent who think the next three months will be a good time for small businesses to expand

    Capex: Percent planning a capital expenditure during the next three to six months

 

Industries Index

The SBET survey data are also published by major industry and geographic region on a quarterly basis. Survey data for each of the prior three months are aggregated into totals, each month weighted equally. The three month totals yield sufficient cases to provide meaningful results for separate industries and regions.

The industries for which NFIB provides data include: agriculture, construction, manufacturing, wholesale, retail, transportation, financial services, professional services, and non-professional services. The industry data appear in January, April, July, and October.

The SBET questionnaire divides the services industry into three groups: financial services, professional services, and non-professional services. The division of the latter two groups was particularly arbitrary. The NAICs coding is very close in practice to NFIB’s professional and non-professional services. The NAICs professional, scientific, and technical services, health and social services, and educational services combined, approximate professional services. The NAICs administrative, support, and waste management services, accommodation and food services, and “other” services combined, approximate the non-professional services. Only the arts, leisure and recreation services in NAICs, a modestly populated industry, seem to overlap, but most would fall in the latter classification.

Regional Index

The NFIB Research Foundation also produces SBET data by geographic region. The regions are the eight commonly used by the Census Bureau. There are two exceptions. The region structure collapses New England and the Middle Atlantic regions, leaving just seven rather than the traditional eight. The reason is New England’s relatively small population and the need to have sufficient cases to produce meaningful results. The second is changes in the bland, bureaucratic names sometimes given regions. With all due respect to upstate New York, the Great Lakes is labeled the East North Central region. Similarly, the West North Central is now the Plains and West South Central is now the West Gulf region, and the combined New England and Middle Atlantic regions become the North Atlantic region.

A list of regions and the states that comprise them follow:

    North Atlantic - (CT, MA, ME, NH, NJ, NY, PA, RI, VT)

    South Atlantic - (AL, DC, DE, FL, GA, KY, MD, MS, NC, SC, TN, VA, WV)

    Great Lakes - (IL, IN, MI, OH, WI)

    Great Plains - (IA, KS, MN, MO, ND, NE, SD)

    West Gulf - (AR, LA, OK, TX)

    Mountain - (AZ, CO, ID, MT, NM, NV, UT, WY)

    Pacific - (AK, CA, HI, OR, WA)

NFIB Research Center

The NFIB Research Center produces Small Business Economic Trends. The Center was established to promote greater understanding of small business and the conditions that impact it. Today, it produces and disseminates various surveys, economic simulations, and studies on small business, focusing on small business operations and public policy impacts.