Survey reveals upbeat outlook

By Joe Richter
Bloomberg News Service

Optimism among small U.S. businesses rose to near an 18-year high in July, as expectations for the economy improved and more owners said they planned to increase spending and hiring, according to a private survey.

The National Federation of Independent Business' small-business optimism index rose to 105.9 last month from 103 in June. The index registered 106.9 in December, the highest since the group began keeping monthly figures in 1986. An index of 100 is set to a baseline year of 1986 and seasonally adjusted.

More small-business owners said they thought it was a good time to expand facilities, and a higher percentage than a month ago said they expected to create new jobs. The survey follows government reports showing a slowing economy in the second quarter and disappointing job gains last month.

"Capital spending remains strong and plans for future expansion remain strong," William Dunkelberg, the group's chief economist, said in the report.

Dunkelberg said the government's second-quarter growth estimate was "inconsistent with the strength of the small business sector."

The survey showed that 35 percent of the small businesses expected an increase in sales adjusted for inflation compared with 26 percent a month earlier. Some 25 percent said it was a good time to expand, compared with 21 percent in June.

A Commerce Department report last month showed the U.S. economy grew at a 3 percent annual rate from April through June, the slowest in more than a year, as energy prices rose and consumer spending slowed.

A Labor Department report Friday showed that employment growth slowed for a fourth straight month in July, with just 32,000 jobs created, the smallest gain this year.

The NFIB survey found that 15 percent of small companies said they planned to increase employment, compared with 14 percent in June.

The report was based on responses from 1,221 member firms surveyed through July 31.