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This Week's Economic Roundup

Small-business owners plan to add more jobs; weaker housing market drives consumer spending down.
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The mood of the nation's small-business owners improved in January as spending and job-creation plans picked up, while manufacturers and wholesalers have worked down their inventories to a near two-year low. Here's a look at this week's economic developments and how they may impact your business.

Small-Business Mood Improves

A stronger outlook on job creation lifted the mood of the nation's small-business owners in January, the National Federation of Independent Business reported Tuesday.

Based on a national survey of small-business owners, the Washington-based lobby's monthly optimism index rose 2.5 points last month to 98.9, compared to a benchmark level of 100. Typically, about a quarter of the group's 600,000 members respond to the monthly surveys.

Seven of 10 index component made gains in January, including the number of owners planning to create jobs in the months ahead, the report said. Meanwhile, about a one-fourth said they already had unfilled job openings, the report said.

"Job creation should continue reasonably strong, assuming owners can find qualified applications," William Dunkelberg, the group's chief economist, said in a statement.

Spending plans were also on the rise, with more owners expecting to buy new equipment, vehicles, or expanded facilities or buildings, the report said.

Consumer Spending Declines

Declines in the housing market were driving down consumer spending in February, Deloitte & Touche reported Tuesday.

As a result, the New York-based consulting firm's consumer spending index fell to 3.58 percent from 3.86 percent in January, the report said.

The index, which tracks consumer cash flow as an indicator of future spending, is based on an analysis of the personal income tax burden, real wages, initial unemployment claims, and home prices.

"While consumer spending still has good momentum going into the New Year, we're seeing a balancing act between the housing market and the labor market, which are exerting opposite forces on the economy," Carl Steidtmann, the chief economist of the firm's research group, said in a statement.   

Retail Sales Flat

Retail sales flattened out in January, driven down by declines in car and gasoline sales, the Commerce Department reported Wednesday.

Excluding car sales, which dropped 1.3 percent, retail sales rose 0.3 percent from December and 2.3 percent compared to January 2006, the weakest year-over-year gains in nearly three years, the report said.

In January, sales were up at furniture and building supply stores, general merchandise stores, sports and books stores, and online retailers, the report said.

Business Inventories Low

Despite an upturn in December sales, inventory levels at the nation's manufacturers, wholesalers, and retailers were unchanged for the month, the Commerce Department reported Wednesday.

As sales rose 1.4 percent from November, inventories rose by 0.3 percent at retailers and 0.1 percent at manufacturers, while wholesalers' inventories declined by 0.5 percent, the report said.

The inventories to sales ratio at the end of the month dropped to 1.28, compared to 1.26 a year earlier, the report said. The ratio has declined steadily in recent years.    

While colder weather boosted output from utilities, the nation's overall industrial production dropped by 0.5 percent in January, the Federal Reserve reported Thursday.

The month-to-month decline in output was the sharpest since Hurricane Katrina disrupted shipping operations in the Gulf Coast in September 2005.

Capacity utilization also fell in January, to 81.2 percent from 81.8 percent, the report said.

Jobless Claims Up

The number of new claims for unemployment benefits surged by 44,000 to 357,000 last week, the highest level since November, the labor Department reported Thursday.

In the week ending Feb. 3, the total insured unemployment rate rose 0.1 percent to 2 percent with about 2.56 million people nationwide filing unemployment claims, the report said.

The largest increases in new claims last week were in Virginia, Michigan, and Kentucky, while claims were down in Missouri, South Carolina, and Pennsylvania, the report said.

Last updated: Feb 15, 2007




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