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U.S. small business confidence highest in over 6-1/2 years

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[June 10, 2014]  WASHINGTON (Reuters) - U.S. small business sentiment hit its highest level in more than 6-1/2 years in May, in the latest sign economic growth has shifted into higher gear.

The National Federation of Independent Business said on Tuesday its Small Business Optimism Index increased 1.4 points to 96.6 last month, the highest reading since September 2007, when the economy was about to slide into recession.

The third straight month of increases in the index, which is widely viewed as a good indicator of the economy's health or lack of, further buoyed the growth outlook.

Data on Friday showed the economy scored a fourth successive month of job gains above 200,000 in May, resulting in it regaining all the jobs lost during the recession.

The economy contracted at a 1.0 percent annual rate in the first quarter, dragged down by an unusually cold winter and businesses restocking their warehouses at a pedestrian pace. Second-quarter growth is expected to top a 3.0 percent pace.

Five of the index's 10 components advanced, with big gains in sales and earnings expectations. Small businesses were also very upbeat about prospects over the next six months.

There were also increases in the share of businesses planning to create new jobs, as well as those who believed that this was a good time to expand.

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Small businesses, however, appear to be in no hurry to increase inventories, even as they are optimistic about sales.

The survey also found "price hikes are more widespread than at any time since 2008," a potential sign that inflation pressures could soon be steadily building up.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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