SBET Single Most Important Problem, Updated for November 2010.

I love this data set. We’ve previously discussed what small businesses say is their number one problem. I want to make new graphs and reproduce them here. And since we now have the NFIB Small Business Economic Trends for November 2010 we can incorporate that data as well.

Here is what small businesses say is their number one problem, comparing December 2007 (when the recession started) to the latest data from October, 2010:

Regulation is up a bit, but poor sales has skyrocketed, more than tripling over the time period. Inflation is less of a worry (more on that in a minute), and labor quality and costs, structural concerns for businesses, barely register. For all the talk about a corporatist regime, the idea of large business shaking hands with the government to crowd out small businesses is less of a worry over the past years. And for all the talk about “uncertainty” coming from government, the uncertainty out there is related to the fiscal uncertainty of customers is real, very real, and crushing small businesses.

Let’s look at a subsection of how these evolve over the time period:

“Regulation”, also described as “Government Requirements & Red Tape” goes up a bit when Obama is elected, as well as in the Spring of this year. Health Care, which I was told is “cost and availability” of health care insurance, has gone down. Poor sales stays stubbornly high.

How does “Regulation” and “Poor Sales” look historically? Is this an all-time high for small businesses complaining about red tape, or is it always high? And how does “Poor Sales” do in a recession? Here are the two historically:

Regulation is less of a worry than for much of the past 30 years. Poor sales, which jumps during recessions, is at a record high.

Inflation

Glenn Beck is advising cranks how to ruin Thanksgiving by complaining about inflation in Turkey prices. (I’m confused. Are the right-wing talking points that hyper-inflation is going to happen? Or already happening?) Luckily this guide gives us a sense on how small businesses are dealing with inflation, summarizing for the small business community information they need to know. And instead of raising prices to fight hyper-inflation, small businesses are net cutting prices.

October, 2010 Edition:

INFLATION

The weak economy continued to put downward pressure on prices. Seasonally adjusted, the net percent of owners raising prices was a negative 11 percent, a three point decline. September is the 22nd consecutive month in which more owners reported cutting average selling prices that raising them. Plans to raise prices faded three points to a net seasonally adjusted seven percent of owners. On the cost side, four percent of owners cited inflation as their number one problem and only three percent cited the cost of labor, so neither labor costs or materials costs are pressuring owners to raise prices. With no pricing power and real sales volumes weak, profits are not able to recover.

And now, the November, 2010 Edition:

INFLATION

The downward pressure on prices appears to be easing as more firms are raising prices and fewer are cutting them. Seasonally adjusted, the net percent of owners raising prices was a net negative five percent, a six point increase from September. Plans to raise prices rose five points to a net seasonally adjusted 12 percent of owners. However, most plans to raise prices have been frustrated by the recession and weak sales during the past few years. On the cost side, four percent of owners cited inflation as their number one problem and only three percent cited the cost of labor, so neither labor costs or materials costs are pressuring owners to raise prices. If “pricing power” in making a comeback, owners will begin to see a reversal of rather adverse profit trends.

Wow. Here’s wishing the Federal Reserve luck in trying to get to price stability, and our government something that can increase aggregate demand.

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5 Responses to SBET Single Most Important Problem, Updated for November 2010.

  1. My wife says prices on ebay have plummeted. I don’t know if that’s easy to quantify.

  2. Pingback: What worries small business owners the most « Phil Ebersole's Blog

  3. Chris Gaun says:

    I wonder, since every conservative critic is going to say “aggregate demand, crazy, look at corporate profits” is there a good explanation for the discrepancy? See MR: http://www.marginalrevolution.com/marginalrevolution/2010/07/if-aggregate-demand-is-so-low-why-are-profits-so-high.html & Justin Fox: http://blogs.hbr.org/fox/2010/11/the-real-story-behind-those-re.html

    Is it just that net profit margins have changed because of increased productivity?

  4. Pingback: Small business and the Great Recession « Phil Ebersole's Blog

  5. Pingback: False Equivalence on the Economy Ramblings

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