15 Oct 2025
Small business optimism has reached a three-month low, primarily due to concerns over the economic outlook and excess inventory. Meanwhile, the ongoing US government shutdown is impacting the quality and collection of crucial CPI data, potentially leading to inaccuracies and lasting sampling errors.
The NFIB Index for September registered its lowest level in three months, reflecting declining confidence and optimism among small businesses. This decrease is attributed to concerns about the economic outlook and an excess of inventory, with five of ten components showing a decline. Only 23% of business owners anticipate improved conditions in the next six months, a slight reduction from the previous report. The net percentage of firms reporting low inventory experienced its most significant drop since 1997, and fewer businesses expect sales increases. Inflationary pressures remain a primary concern, with 14% of owners citing increased costs as their biggest operational challenge, and 31% plan to raise prices in the coming three months. While most businesses currently assess their condition as healthy, they face inflationary pressures, anticipate reduced sales, and encounter challenges in the labor market, as indicated by a rising ADP index to its highest level since February, suggesting a less opportune time for business expansion.
The ongoing US government shutdown is degrading the quality of critical Consumer Price Index (CPI) data, with the Bureau of Labor Statistics (BLS) taking the rare step of calling in staff to prepare the September CPI report, scheduled for October 24th. The limited availability of personnel during the shutdown risks lower data quality, increased volatility, and even missing data for some indicators. As CPI data relies on in-person collection of information for approximately 80,000 items nationwide—a process typically involving three 10-day periods and accounting for 60% of data collection last year—reduced staffing poses significant challenges. The BLS may halt collecting parts of the CPI sample, likely relying on estimation techniques (imputation) to fill gaps and re-weighting categories due to unavailable prices, which could lead to a reduction in recorded prices and decreased accuracy for October CPI estimates. Such sampling errors could potentially persist until May 2026, as evidenced by the 2013 shutdown which delayed CPI by two weeks and resulted in only 75% of the usual sample being collected. While some price data, like for gasoline and vehicles, are now gathered from alternative sources less affected by shutdowns, the majority of prices still depend on in-person visits. This situation could make CPI data incomparable with other surveys and elevate the risk to overall data quality, with potential ripple effects on other economic reports, including the Fed's preferred PCE index. Economists advise extreme caution when interpreting any anomalous data points in October reports.
Global trade dynamics are undergoing significant transformations, extending beyond US-China tensions to involve other nations. Canada, for instance, primarily imports vehicles from Mexico rather than the US. China has shifted its soybean purchases from the US to South American producers and has resumed direct flights with India, fostering increased trade in rare earth minerals and strengthening previously subdued relations. New global trade patterns are emerging as governments forge wider commercial alliances and companies actively seek alternative markets. Smaller economies are adapting to higher costs associated with accessing US consumers and businesses, prompting them to explore Asian and African markets. A 14-country consortium, including New Zealand, Singapore, Switzerland, and the UAE, has formed a partnership to boost trade and investment. Despite predictions of instability from tariff wars and reactions to US protectionism, the global economy has demonstrated resilience, with 85% of international trade now occurring outside the United States. The WTO's October report forecasts an increase in goods trade growth for 2025, from 1.9% to 2.4%. Shipping companies and port operators are directly observing shifts in logistics. US trade barriers are prompting Chinese manufacturers to explore alternative markets, a shift that could positively balance global consumption patterns and supply conditions originating from China.
Federal Reserve Chairman Jerome Powell is scheduled to deliver a speech at 7:50 PM Iran time, which is anticipated to be significant for discussions concerning monetary policy.
The evolving landscape of global trade sees governments fostering new alliances and companies actively seeking alternative markets, shifting away from traditionally dominant partnerships.
| Insight | Detail |
|---|---|
| NFIB Optimism Decline | Small business confidence reached a 3-month low, primarily driven by economic outlook fears and excess inventory. |
| Inflationary Pressures on Small Businesses | 14% of owners cite increased costs as their biggest problem; 31% plan price hikes in the next three months. |
| Government Shutdown's CPI Data Impact | The shutdown risks low data quality, high volatility, and potential long-term sampling errors due to limited in-person data collection. |
| CPI's Broader Economic Influence | Degradation of CPI data quality affects other crucial economic reports, including the Federal Reserve's preferred PCE index. |
| Global Trade Realignments | Governments are forming new alliances, and companies are seeking alternative markets (e.g., Asia, Africa), shifting away from traditional US-centric trade. |
| Resilience of Global Economy Amid Protectionism | Despite protectionist tendencies, 85% of global trade occurs outside the US, and the WTO forecasts increased goods trade growth for 2025. |
