Chicago, Illinois – Ignoring data may sometimes prove to be beneficial, as not all datasets hold useful information. With the proliferation of datasets, there is also an increase in the noise they create, but hidden within this noise can be valuable signals, especially when it comes to survey-based soft data.
The NFIB Small Business Survey has long been characterized by pervasive pessimism, with scant hope for economic improvement and only tentative expectations for sales growth. Despite this gloomy outlook, the U.S. economy has shown resilience, navigating through periods of oscillating inflation and maintaining strong GDP growth, boosted by a Federal Reserve focused on mitigating inflation through elevated interest rates.
An interesting observation from the data is the matter of “real” sales, where nominal revenues are not adjusted for inflation, introducing potential errors into the dataset related to sales outlook and inflation expectations. This trend of flat inflation-adjusted revenues is likely to persist during the upcoming earnings season.
Costco’s recent success, even without adjusting sales for inflation, challenges the notion of the necessity of such adjustments, emphasizing that the company’s performance remains robust. The NFIB survey’s findings on earnings also paint a bleak picture, with minimal positive readings in nearly four decades and little sign of a recovery in hiring post-COVID-19.
This data holds significance as it underscores the concept of a “handoff to normal” in the economy, where existing pessimism may actually serve as a catalyst for future economic growth as businesses, particularly small ones, potentially play a larger role in the recovery process. Shifting perspectives from viewing skepticism as a hindrance to acknowledging it as a potential driver for economic progress can lead to surprising revelations for those closely monitoring economic trends.
The NFIB survey’s insights on sales and economy expectations, earnings trends, and actual employment changes offer valuable insights into the current economic landscape, pointing towards potential shifts in sentiment that could shape the future trajectory of the economy. Samuel Rines, a Macro Strategist at WisdomTree, provides expert analysis on the implications of these findings on investment strategies, offering a unique perspective on navigating the complexities of the global economy.
