Business owners remain optimistic and continue spending; retail sales post solid gains.
Feb. 16, 2006--More jobs opened up at small business across the nation in January, signaling a robust labor market, while owners kept investing in new equipment and inventories. Here's a look at this week's economic developments and how they may impact your business.
Jobs Openings, Spending Up
Despite a slowdown in activity, a stronger labor market had small-business owners feeling optimistic about the year ahead, according to a report by the National Federation of Independent Business released Tuesday.
In its monthly survey of economic trends, the Washington-based small-business lobby said more than 25% of owners polled reported job openings in January, a jump of 4% from the previous month. Also on the rise in January were higher sales expectations, plans to increase employment, and inventory satisfaction, the report showed. About a quarter of the group's 600,000 typically respond to the survey.
More jobs is great news for small businesses and "points to solid job creation and continued downward pressure on the unemployment rate," NFIB chief economist William Dunkelberg said in a statement.
Small businesses were also spending in January, with some 62% reporting capital outlays, the group said. Just under half invested in new equipment, while a few others bought vehicles or expanded facilities. The biggest spenders were in the wholesale trade, manufacturing, and agricultural sectors, according to the survey.
At the same time, reports of increased sales volumes dipped to just 2% of all businesses polled, the report showed, with 28% of manufacturing firms and 21% of construction firms reporting gains. The number of business in all sectors raising prices was unchanged at 18%. Most businesses blamed lower earnings on weaker sales, and higher material and labor costs, the survey said.
Overall, the group's optimism index remained high, slipping just three-tenths of a point in January to 101.1. Results above 100 represent gains.
Second Wind for Housing?
New-home construction surged unexpectedly in January to a 33-year high, the Commerce Department said Thursday.
Housing starts in January hit a 2.276 million unit annual rate, the department said, up by 14.5% from 1.988 million in December. The gains were shared across the country, led by 29.2% increase in the Northeast, the department said.
Also up in January were construction permits -- an indicator of future activity -- by 6.8% to 2.217 million, the report showed.
Sharing the upbeat mood, retail sales rose 2.3% in January, the separate Commerce Department report showed Tuesday. Even excluding auto sales, which rose 3%, retail sales improved by 2.2% over December, the strongest month-to-month increase since May 2004, the report showed.
Furniture, clothing, and building-materials stores posted the strongest gains in January, the department said.
Meanwhile, higher energy costs pushed import prices up 1.3% in January, while export prices rose 0.7%, the Labor Department said Thursday.
By contrast, import prices dropped a revised 0.1% in December, the department said. Crude oil prices climbed by 8% in January -- and a spiraling 48.2% over the past 12 months, the report showed.