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This Week's Economic Roundup

Small-business owners lower expectations; gas prices rise after weeks of decline.
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Small-business owners are growing increasingly concerned with the economy, amid signs that higher gas prices and a softer housing market will have consumers cutting back on spending in the months ahead. Here's a look at this week's economic developments and how they may affect your business.

Small-Business Optimism Weakens

The economic outlook of the nation's small-business owners continued to fade in June, prompting many to cut back on hiring and spending plans, the National Federation of Independent Business reported Tuesday.

The Washington-based lobby group's monthly small-business optimism index fell 1.2 points to 96, below its historic average of 100.2. The index, which is based on a survey of the group's 600,000 members, has remained below 100 for 15 of the past 16 months. Typically, about a quarter of all members respond to the surveys.

In June, seven of 10 components of the index declined, including higher sales expectations, plans to increase employment and spending, and earnings trends, among others.

"Small-business owners have seen little to encourage them about growth," William Dunkelberg, the group's chief economist, said in a statement. Despite the downturn, he said there were few signs that the economy was slipping into a recession.

Consumer Spending Up

A robust labor market has kept consumers spending this year, despite rising gas prices and a continued downturn in the housing market, Deloitte & Touche reported on Thursday.

The financial firm's monthly consumer spending index, which gauges future spending by tracking cash flow, rose to 2.86 percent from 2.75 percent last month. Results are based on an analysis of household tax burdens, jobless claims, wages, and home prices.

Despite the gains, falling home prices and rising gas prices are expected to start cutting into spending later this year, the report said.

Carl Steidtmann, chief economist of the firm's research division, cautioned retailers to keep inventories lean for the months ahead.

A separate consumer spending survey released Thursday by America's Research Group found that shoppers were planning to hold off on big ticket purchases. According to the International Council of Shopping Centers, chain-store sales for the week ending July7 rose just 0.1 percent.

Gas Prices Reverse Course

After declining for over a month, average gas prices starting climbing back up this week, rising 2.2 cents to $2.981 per gallon, the Energy Information Administration reported Wednesday.

This week's gains were led by sharp increases in the Midwest, where prices jumped by 9.1 cents to $3.045 per gallon. By contrast, prices continued to fall in the East Coast, Rocky Mountain, and West Coast regions. Overall, average prices were 0.8 cents higher than in the same period last year.

Jobless Claims Down

The number of new claims for unemployment benefits dropped by 12,000 to 308,000 in the week ending July 7, the Labor Department reported Thursday.

The adjusted insured unemployment rate the previous week was unchanged at 1.9 percent, with 2.554 million people filing jobless claims, the report said.

The biggest decreases in new claims last week were in Pennsylvania, Florida, and Massachusetts, while the biggest increases were in New York, Kentucky, and New Jersey.

Last updated: Jul 12, 2007




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