National Federation of Independent Business said on Tuesday its
Small Business Optimism Index fell 1.3 points to 93.9 last
month, the weakest reading since February 2014. Still, small
businesses remained fairly upbeat about the labor market.
The NFIB said there was little sign that a stock market selloff
and December's interest rate hike by the Federal Reserve, the
first in nearly a decade, had impacted confidence. Owners'
perceptions of business conditions in six months weakened
sharply as did their views of expected sales.
"These expectations are important determinants of decisions to
hire, to expand business operations and to order new inventory,
all drivers of economic growth," the NFIB said.
The ebb in confidence mirrored other weak economic data ranging
from manufacturing to consumer spending and trade. The economy
grew at a 0.7 percent annual pace in the fourth quarter,
constrained by a strong dollar, sluggish global demand and an
effort by businesses to sell off inventory.
Ongoing capital spending cuts by energy firms as oil prices
continue to slump is also weighing on gross domestic product.
Despite the downshift in sentiment and weak economic growth,
small businesses are not scaling back on hiring and continue to
report a shortage of qualified workers to fill job vacancies.
This is prompting businesses to start raising wages to attract
and retain workers. The share of small businesses raising
compensation increased to its highest level since 2007.
With the sales outlook weak, businesses continued to hold back
on increasing inventories last month and offer price discounts
to clear stock from their warehouses.
"It appears that there was a lot of price cutting late in the
year to boost sales and reduce inventory," the NFIB said.
(Reporting by Lucia Mutikani; Editing by Meredith Mazzilli)
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