U.S. small business optimism gains

Reuters
July 13, 2004

WASHINGTON - U.S. small businesses grew more optimistic last month as rising demand helped many increase prices but caused some problems in keeping shelves stocked, a survey released on Tuesday showed.

The National Federation of Independent Business said its monthly small business optimism index reached 103, continuing a 15 month string above 100, a record in the survey's 18-year history.

"Sales were strong, so inventory was taken off the shelves as fast as owners put it out," said NFIB chief economist William Dunkelberg in a statement.

Nearly one-quarter, or 23 percent, of those surveyed reported higher profits, which most attributed to stronger sales. The report indicated some businesses were pressured to meet demand. While 9 percent of those surveyed expect to increase inventories -- up 2 percentage points from May -- production may not meet their demand, the survey said, especially in the area of construction.

The survey said 29 percent of the businesses said they were able to raise prices, net of those cutting prices, up 4 percentage points from May.

"The small-business 'pricing party' is in full swing," Dunkelberg said. Rising demand gives businesses the opportunity to increase their prices, though higher energy costs contribute as well, he said. Small manufacturers led the price hike trend, followed by wholesale trade, agriculture and construction.

The number of businesses expecting to raise prices, at 28 percent, is double from last year.

Amid the positive news, the number of businesses expecting to expand in the next six months was 4 percentage points lower than May's survey, partially because of a "typical return to reality following the initial surge at the start of a recovery," the survey summary said.

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