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Owners of small firms less optimistic

March 14, 2007|From Bloomberg News

Optimism among small-business owners declined last month as fewer companies said they expect sales would rise, a private survey found.

The National Federation of Independent Business' index of business optimism fell 0.7 of a point in February to 98.2, the Washington-based advocacy group said.

"The economy is really in a steady state," William Dunkelberg, the group's chief economist, said. "We're not falling out of bed here. Nothing is going seriously awry."

Seventeen percent of small-business owners said they expect higher sales, down from 22% in January, while those planning to add workers fell to 13% from 17%. The survey, whose results are consistent with the slowing economy, also showed less than one-third of the firms surveyed plan to increase capital spending, unchanged from a month ago.

The survey also pointed to a tight labor market and an unemployment rate that was likely to hold steady for the first half of 2007, the business group said.

About 15% of small-business owners polled said they added workers in February, while 11% trimmed their workforce, the survey showed. A quarter of firms reported unfilled job openings, and a little more than one-tenth cited the availability of qualified labor as the biggest business problem.

Three of the 10 index components in the survey rose last month. Of the small businesses surveyed by the group, 18% said it was a good time to expand, and 3% said they planned to increase inventory. Both components showed a gain of 1 percentage point over the prior month.

The small-business survey also showed 13% of companies reported higher selling prices, up 1 percentage point from January. The Federal Reserve is counting on slower economic growth to help keep price pressures in check. The number of firms raising prices is too high to get the inflation rate into the Fed's "sweet spot," Dunkelberg said.

The federation's survey was based on 725 respondents. The group has about 600,000 member firms, and 80% of its members have fewer than 40 employees.

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