The Outlook Index and the Economic Performance

The NFIB Outlook for General Business Conditions Index may be the least foretelling index for overall macroeconomic conditions in this otherwise valuable set of economic barometers. There appears to be few predictive abilities regarding U.S. recessions or recovery phases. Steep declines as in 1992—1993, 2003, 2005, 2011, and 2012 called for possible declines in economic output, but were unanswered as the economy expanded for several years after each signal of weakness projected by the Outlook for Business Conditions Index (Exhibit 6.6).

It is more likely that issues centric to the small business sector were less favorable and therefore resulted in these lowly readings.

There is little doubt that the 20-plus-point collapse in the Business Outlook Index in mid-2012 was related to the uncertainties surrounding the Affordable Care Act, which imposed a penalty on all businesses (with 50 or more people working 30 or more hours per week) that didn’t offer employees health care insurance. Commentary included in the NFIB monthly reports confirmed these fears.

EXHIBIT 6.5 NFIB Good Time to Invest Index versus GDP Y/Y%

EXHIBIT 6.6 NFIB Outlook for General Business Conditions Index versus Coincident Economic Indicator

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