US small business optimism 'still declining'

13 August 2008

Sentiment among American small firms took a further knock last month, the new National Federation of Independent Business (NFIB) Index has revealed.

Weaker expenditure forecasts for some businesses have led to a one-point slide on the index to 88.2.

This is the third straight monthly drop.

According to the data, plans among small firms to make capital spending over months to come dropped from 26 per cent in June to just 21 per cent.

This is the weakest such reading for three decades, CNBC reports.

William Dunkelberg, chief economist at NFIB, said: "Getting a discount on loans or the purchase price of equipment is not sufficient to stimulate much spending if the equipment isn't needed to serve customers."

Inflation was also identified as the number-one problem of 20 per cent of small firms - the highest level since 1982.

"Although small business owners heeded Fed warning about a possible recession, they didn't get the memo explaining how the weak economy moderates inflation," Mr Dunkelberg added.

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