This Week's Economic Roundup
Despite upbeat assessments from the White House, small-business owners say they are worried about the economy and thinking twice about spending and hiring plans. Here's a look at this week's economic developments and how they may impact your business.
Deficit Down, Mood Dampens
At his annual mid-year budget review on Tuesday, President Bush predicted stronger tax revenue would reduce the deficit this year to $296 billion, down from $318 billion in 2005.
"This economy is growing," Bush said. "Federal taxes are rising, and we're cutting the federal deficit faster than expected."
However, the president's upbeat mood wasn't shared by small-business owners, who are expecting harder times ahead and were scaling back plans to spend and hire in June, the National Federation of Independent Business reported on Monday.
Declines in sales-growth expectations, along with weaker job-creation plans and inventory purchases, knocked 1.8 points off June's small-business optimism index, which now stands at 96.7 compared to its 20-year benchmark of 100, the Washington-based lobby said.
The index is based on monthly surveys of the group's 600,000 members. Typically, about a quarter of its members respond.
Of those, only 24% reported higher earnings in June, while just 10% said they created new jobs, averaging about three new workers per firm, the report said.
Spending plans for new vehicles, furniture, and other capital equipment also fell, to a three-year low, the report said.
Elsewhere, entrepreneurs appeared to be split on the state of the U.S. economy, according to a recent survey by the Matrix Capital Markets Group, a middle-market investment bank based in Richmond, Va.
In interviews with more than 600 business owners nationwide between March and May, 43% said they felt the economy was getting better, while the rest felt it was getting worse, the report said.
Trade Gap Widens
A jump in the amount and cost of imported petroleum pushed the U.S. trade deficit to $63.8 billion in May, an increase of 0.8% from April, the Commerce Department reported on Wednesday.
The wider gap came despite a 2.4% rise in exports to $118.7 billion, the biggest gain since December 2004, the department said.
At the same time, imports of crude oil reached an average of 10.5 million barrels a day, with prices hitting a record-high of $61.74 a barrel, the report said.
U.S. wholesalers saw an uptick in inventories and sales in May, the department said in a separate report on Monday.
Inventories rose by 0.8% to $375.8 billion, while sales rose by 1.6% to $325.5 billion, the report said.
Still, the inventory-to-sales ratio, which gauges the number of months before inventories are depleted at current sales rates, was 1.15 in May, down from 1.20 the previous year, the report said.
Jobless Claims Up
New claims for unemployment insurance jumped by 19,000 to 332,000 last week, the Labor Department reported Thursday.
The gains pushed the four-week moving average to 317,250, and increase of 8,750 from the previous week, the report said.
The largest gains in new claims were in Kentucky, New York, Indiana, Michigan, and Pennsylvania, while North Carolina, Florida, and California saw declines, the report said.
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