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Tuesday, August 01, 2006

Declining US Small Business Confidence

By Yaser Anwar, CSC of Equity Investment Advisors

The NFIB small business survey tends to be volatile, but the message in recent months is clear: confidence has eroded markedly.

The “good time to expand index” has dropped well below its average level, as the drag from rising borrowing costs, energy prices and concerns about final demand have undermined sentiment.

This sector has been a key source of job growth in recent decades, and the hiring plans index has rolled over. Companies have fresh memories of the worst profit contraction in the post-WWII period during the first part of this decade, and will be quick to throttle back expansion plans if demand continues to soften.

The latter is increasingly seen as a problem, underscoring that the economy is set to grow at a sub-par pace for a few quarters.

Source: BCA

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