Rob Carnell, Chief International Economist at ING, suggests that in the US small businesses have been doing reasonably well, and may be a better guide to national direction than national ISM indices. Key Quotes “The small firm NFIB Business survey does not get as much attention as the more widely watched ISM surveys, and increasingly, the Markit PMIs. But this is probably a mistake. The Small Business and Enterprise Council of the US1 notes that firms with 20 or fewer workers made up 89.6% of the 5.73 million employer firms in the US (2012 data). They produced 46% of GDP in the most recent year for which data are available (2008), and between 1993 and 2013, accounted for 63% of the 22.9 million new jobs created. Though this accounted for only 17.6% of private sector employment – this contrasts with popular wisdom that they account for 60% or more. We have also to make allowances for the fact that some of this data is rather old. That said, these firms still clearly make up a good chunk of the economy, and even if the employment total may not be all that substantial, their role in the rise and fall in US employment is clearly more important, and given the recent discussion about a potential US recession, small firms, with their more domestic focus may be a better place to look than bigger-firm and more international ISM or PMI data. The most recent manufacturing ISM nudged up a little from a very weak January reading, so it will be interesting to see whether the NFIB throws more weight behind this increase, continuing its ongoing improvement. Perhaps there is less to learn from the employment intentions survey, but with payrolls growth so tough to forecast, we will look at anything that may give us some insight. One thing that doesn’t seem to back up the recession story from a small firm perspective is sales, which are falling rapidly as one of the biggest problems for small firms – any turnaround here would be noteworthy, but not exactly a recession threat – at least unless it utterly soared. In contrast, labour market tightness has been growing, more of an overheating story, and one that still suggests some room for further Fed tightening this year – in contrast to recent market pricing. One thing is for sure, this is a survey to keep an eye on, and we will be reporting any notable changes in the data when it is released.” For more information, read our latest forex news.