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This Week's Economic Roundup

Business owners plan to hire and spend more; Fed hikes interest rates.
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Small-business optimism rebounded in April, despite signs elsewhere the economy is poised to slow down. Here's a look at this week's economic developments and how they may impact your business.

Optimism Up

With profit trends and sales rising, small-business owners were in a better mood in April, the National Federal of Independent Business reported Monday.

The small-business lobby's monthly optimism index, based on a survey of about a quarter of its 600,000 members nationwide, jumped two points in April to 100.1, climbing back above its benchmark 10-year average of 100 after sliding in March, the group said.

A net 27% of the small businesses polled reported better earnings, which owners credited to either stronger sales or higher selling prices.

More owners reported plans to increase employment and capital outlays in April, and expected higher sales and better economic conditions in the months ahead -- with the number of owners expecting improvements in the economy eclipsed by those saying "it can't get better than it is now," according to the NFIB.

While more owners were also buying new equipment, vehicles, and improving or expanding facilities, the survey reported a nine-point spike in the net percent of businesses raising prices -- stoking fears of inflation, the group said.

"Much of the strength in pricing is coming from the housing market, and that could fade substantially this year," William Dunkelberg, the group's chief economist, said in a statement.

On Tuesday, however, a report by the Small Business Administration showed consumers and business owners becoming more pessimistic by the end of the first quarter, despite gains in owners' income, investment, and employment.

Retail Sales Flat

Soaring gas prices hit retailers in April, with total sales rising just 0.5%, the Commerce Department reported Thursday.

While sales at gas stations surged by 4.6% from March and 17.4% from the same period last year, retail sales excluding gas rose 0.1%, the department said.

Sales at electronics and appliance stores were also on the rise in April, by 0.4%, as well as at grocery stores, and clothing and sporting goods outlets.

Elsewhere, sales were down at car lots, furniture stores, department stores, and building-materials and garden-equipment centers, the report said.

Final sales tallies at the nation's wholesalers for March showed a gain of 0.7% from February, the Commerce Department said in a separate report Tuesday.

Wholesalers' inventories were also up, by 0.2%, the department said.

Jobless Claims Down

The number of new claims for unemployment aid dropped by 1,000 last week to 324,000, the Labor Department reported Thursday.

The figures were inflated by a funding crisis in Puerto Rico, which knocked some 20,000 government employees out of work at the start of the month, the department said.

Those drawing benefits from previous weeks also fell, by 49,000, to 2.392 million -- the lowest since January 2001, the department said.

Fed Raises Rates

The Federal Reserve raised short-term interest rates by a quarter-point to 5% on Wednesday, marking its 16th increase in two years.

"Economic growth has been quite strong so far this year," the central bank said in a statement, adding higher energy prices and the cooling housing market would likely stem growth in the months ahead.

Last updated: May 11, 2006




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