The survey of the National Federation of Independent Business continues to show a pessimistic outlook about business conditions in the near term. The Small Business Optimism Index fell to 90.9 in May from 91.2 in the prior month. It is important to note that the index has fallen for three straight months and the level of the index has failed to move up to levels seen during an expansionary phase of a business cycle.

Responses to a few questions reveal a continued gloomy assessment of business conditions. Only 3.0% of respondents expect sales to increase in the next six months, the lowest since October 2010. At the same time, the number of respondents planning to increase employment turned negative, the first such indication since April 2011 (see Chart 5). The number of respondents reporting inflation as problematic rose to 10%, the highest since October 2008.

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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