Small Businesses confirm economy is in deleveraging and deflation mode

The January Small Business Economic Trends from the NBIF is contrasting widely with the "recovery" and "green shots" and all the other propaganda coming out of US government agencies.

It contains many interesting charts and figures, I highly recommend you read it.

What's very sad, is that this report contains in 3 pages a perfect analysis of the current economic environment: over-borrowed consumers are saving, sales are collapsing, so are wages and prices, to many houses, shopping centers and restaurants were opened, accessibility to credit is not the problem, and government intervention is making things worse.

Here are some quotes from the Summary and Commentary sections (emphasis mine):

Small business owners entered 2010 the same way they left 2009 – depressed.[...]

Owners complained that “poor sales” was their top problem, and there is no need to hire with no new customers. It is hard for workers to “earn their pay” in this environment, a necessity if a firm is to stay in business.

[...]

The weak economy continued to put downward pressure on prices. Eleven (11) percent of the owners reported raising average selling prices, but 27 percent reported average price reductions. Widespread price cutting contributed to the reports of lower nominal sales. Seasonally adjusted, the net percent of owners raising prices was a negative 18 percent, a four point improvement. A net seasonally adjusted eight percent of owners plan to raise prices, an increase of five points from December. On the cost side, three percent of owners cited inflation as their number one problem (e.g. costs coming in the “back door” of the business) and only 4 percent cited the cost of labor, so neither labor costs nor materials costs are pressuring owners.

[...]

Of the owners reporting lower earnings compared to the previous three months (55 percent, up one point), 58 percent cited weaker sales, two percent each blamed rising labor costs, six percent higher materials costs and lower selling prices, and two percent higher insurance costs. Poor real sales and price cuts are responsible for much of the weakness in profits. Owners continued to reduce compensation at a record pace, with 11 percent reporting reduced worker compensation and 10 percent reporting gains, each up one point from December. Seasonally adjusted, a net one percent reported raising worker compensation, a record low reading.

[...]

Twenty-four (24) months of recession have sapped the financial strength of many small firms that are too numerous now in the new spending/credit environment. Too many houses were built, too many strip malls opened, too many restaurants started, too many new retail outlets were launched in the 2003-2007 period and all of them cannot be supported by a consumer that now chooses to save.

[...]

The remaining 89 percent of all owners either obtained the credit they wanted or were not interested in borrowing. Only five percent of the owners reported “finance” as their #1 business problem (up one point).

[...]

Washington still does not get it. It pays lip service to the fact that small business generates half of private sector GDP and creates over two-thirds of private sector net new jobs, but when it comes time to provide help, small business gets $30 billion IF banks decide to accept the TARP funds to support loans and IF the owners can subsequently get a loan from a bank. But for most firms, this dinky amount is of little help. More so, this new aid misses the main problem since only five percent of small business owners cite “financing” as their top business problem but 31 percent cite “poor sales.”

[...]

Lawmakers also allowed the minimum wage to rise by nearly 11 percent in July 2009, catapulting teen job loss to over 500,000 and an unemployment rate of 27 percent in the second half even though the economy started growing. This was double the loss in the first half when GDP growth was plummeting. If the administration wants to count “jobs created and saved” it should also be accountable for “jobs destroyed or prevented.”

[...]

On top of all that bad news, small business owners fear Washington will then feel the need to “stimulate” us with even more spending and larger government (and taxes), the death knell for private sector vitality.

[...]

the President and Congressional leaders still sound like they plan to press on with their agenda, not good news for small business owners.

And here the most deflationary charts I've seen:

Prices are falling:

Compensations are falling:

Prices and compensations are falling: