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The Economy This Week

Optimism among small-business owners fades; retail sales get a seasonal boost.
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Small-business owners are reacting to recent interest rate cuts by slashing spending and hiring plans, while manufacturers continue to struggle with soaring energy prices. Here's a look at this week's economic developments and how they may affect your business.

Owner Optimism Fades
Sparked by the recent Federal Reserve interest rate cuts, optimism among the nation's small-business owners fell to a 14-year low in November, the National Federation of Independent Business reported Tuesday.

The downturn reflected lower expectations for sales and improved business conditions, along with a weaker earnings trend, the Washington-based lobby group said.

"Things were looking good on Main Street until the Fed warned that the economy was at risk of sinking," William Dunkelberg, the group's chief economist, said in a statement. He said small-business owners responded by cutting hiring, capital spending, and other growth-related activities.

On Tuesday, the Fed trimmed interest rates by another quarter point to 4.25 percent, the third cut since September.

Retail Sales Up
Shrugging off economic worries, shoppers drove retail sales up by 1.2 percent in November, the sharpest increase in six months, the Commerce Department reported Thursday.

Much of the sales gains were the result of higher gas prices. Excluding gas, retail sales rose only 0.6 percent, the report said. Appliance, furniture and sporting goods stores all saw gains, while car dealers continued to struggle with declining sales.

Producer Prices Surge
Energy costs pushed producer prices up by 3.2 percent in November, the steepest increase in over 30 years, the Labor Department reported Thursday.

Excluding food and energy prices, which jumped 14.1 percent, so-called core producer prices rose 0.4 percent.

Gas Prices Down
Average gas prices dropped by 6.1 cents last week to $3.00 per gallon, 70.7 cents higher than at the same time last year, the Energy Information Administration reported Wednesday.

Gas prices were down in every region, including a 10 cent decline in the Midwest to $2.89.5 per gallon. Despite a 3.2 cent decline, prices in California remained 82.5 cents higher than last year at $3.329 per gallon.

Last updated: Dec 13, 2007




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