NFIB:Small Business Optimism Below Average

The National Federation of Independent Business' Optimism Index came in at 90.2 for October,up 1.3 from September.This was below the year to date average of 91.1,and only a little better than the average since January 2009 of 89.1.The gain was mainly the result of less negative views about prospects for real sales and business conditions,NFIB said.
Basically we've gone nowhere since the recession ended,according to Bill Dunkelberg,NFIB Chief Economist.We're thinking the economy will be worse three years from now than better.Sales expectations are still low.I expect it to continue that way for some time.
We've gone through a big period of inventory and staff reduction.We're kind of set for the relatively weak level of consumer spending that we have to deal with.It is a demand problem.Until that changes,we're not gonna be doing any hiring.Consumer sentiment is the worst since 1980.
The NFIB Optimism Index usually leads the market a little bit,Mr.Dunkelberg observed.
Small business generated 65% of net new jobs over the past 17 years,the Small Business Administration claims.

Canadian Economist Named Most Accurate

Sherry Cooper,an economist with BMO Financial Group,has been named the most accurate economist by Arizona State University's W.P. Carey School of Business.Dr.Cooper has also been recognized as one of Canada's most influential women.Educated by the University of Pittsburgh,she was selected as most accurate from a panel of 50 economists by Arizona State.
Dr.Cooper and her team were credited with pinpointing key indicators of both the beginning and end of the recent severe recession.
There's still a big unemployment overhang,Dr.Cooper observed.It wasn't caused by high interest rates as in previous recessions.Businesses laid off massively,so they're reluctant to hire back until the orders really start to come in.Employment contracted by 6%,which is totally unprecedented.
Until we start to see expansion in new businesses as well as old,it's hard to get everyone back to work.We could see unemployment at 9% by the end of 2011.The wave of inventory restocking is over,so the purchasing of equipment and machinery won't be as strong,either.
On the plus side,Dr.Cooper noted that consumption is growing a little bit more.The consumer is starting to come back.The effect of quantitative easing 2,the Federal Reserve's purchasing of more assets,will be pretty modest,but it is stimulative.
We're in a disappointingly slow recovery,but there won't be a double dip recession.
Bank of Montreal(BMO)

What Inventory Can't Provide

To bring unemployment down,we need growth closer to 3%,in the view of economist Mark Zandi,co-founder of Moody's Analytics.U.S. growth was only 2.4% in Q2.A lot of the growth we had was due to inventory rebuilding.It's not engaging in a self-sustaining economic expansion.With many headwinds to hinder growth,there's reason to be nervous.
The rate of manufacturing growth is starting to slow.They can't continue to count on inventory-related gain.
The Institute for Supply Management's Manufacturing Survey released this morning was at 55.5 for July,a decline from June's reading of 56.2.A reading over 50 indicates growth.
Mr.Zandi said he was surprised by Europe's performance and how well the governments have executed austerity plans.Euro-zone inflation is at 1.7%,a 20-month high.Inflation is considered to be one of the markers of economic growth.
Moody's Corporation(MOC)

Early Edition:Manufacturing Picks Up

The Empire State Manufacturing Index showed a big jump in new orders and shipments for July.The index rose 13% to a reading of 12.1.It is the first time the Empire State showed regional growth since February 2007.At the same time,the Philly Fed index showed a reading of 4.2 for July,versus -7.5 for June.A reading above 0 indicates expansion in Mid-Atlantic manufacturing.These positive readings are probably due to inventory replenishment,rather than a spike in consumer demand.As such,they may be only a temporary improvement.