US: April NFIB survey of small firms heads north - ING

Rob Carnell, Chief International Economist at ING, suggests that the trend for the NFIB survey is still pointing down, but this is encouraging if it persists.

Key Quotes

“We like the NFIB survey of small firms – although it may not capture the imagination like the ISM surveys, we think it often gets a better grip on what is happening at the domestic economy level, and is less liable to be bounced around by financial market conditions, commodity gyrations and exchange rate swings.

In recent months, the path of NFIB has been downward, in line with the slowdown in GDP growth, but this month saw a slight bounce – the headline index rising from 92.6 to 93.6. Although this is not a big jump, it is at least the right direction, and though the downtrend remains in place for now, another month like this would be a good sign that the US is recovering from the awful soft-patch in 1Q16.

Within the survey, the main bright spots concerned rising pricing power and related to this, earnings trends. The survey also noted the growing tightness of the labour market – something that was also echoed by the JOLTS survey released on Tuesday. Compensation was also higher, and may be a warning of higher wages growth in coming labour reports, though compensation plans were little changed, actually falling slightly – so no need to get too excited about wages just yet.

But the survey was not uniformly good. Fewer firms expected a better economy, and capital spending – the weak spot of the US economy, remained unchanged at the same level if has been for months.

All in all, better news about activity in this survey, and if matched by some hard activity data in the coming weeks, will raise the prospect of a June Fed rate hike, though September remains our preferred date at the moment.”