Business confidence

January 3, 2019

One indicator that tends to run well in advance of recessions: The National Federation of Independent Business measure of members’ own subjective well-being, known as the small business optimism index. It peaked in the third quarter of 2004, while the American economy was growing faster than it is now, and then started falling until it bottomed out in early 2009.

More recently, the index spiked after President Donald Trump was elected, reached its highest reading ever in August — and has been sagging since.

Small business confidence is important because it can determine if those businesses will hire new workers and invest to grow the business, or if they’ll start to pull back. And small businesses account for roughly half of the nation’s economic activity.

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