The Economy This Week
Higher prices for fuel and other resources are cutting into small-business spending plans, while consumer optimism continues to decline. Here's a look at this week's economic developments and how they may affect your business.
Business Spending Down
Rising energy prices and the slower economy are prompting small-business owners to cut spending plans, Wells Fargo reported Wednesday.
In the latest Wells Fargo/Gallup Small Business index, half of 600 owners polled nationwide said they've postponed major purchases over the past three months, the San Francisco-based lender said. Just under half said they're putting less into savings, while 31 percent have reduced their contributions to a retirement account, the survey found.
About a third said their personal finances were getting worse.
"It has been a challenging year for small businesses," Rebecca Macieira-Kaufman, the head of Wells Fargo's small business segment, said in a statement. She added it's critical that business owners maintain strong financial management practices and plan for the future, especially during an economic downturn.
Consumer Outlook Declines
Economic optimism among consumers fell to a 16-month low this month, driven down by a weaker job market and poor business conditions, the Conference Board reported Tuesday.
Based on a nationwide survey of 5,000 households, the New York-based private research group's monthly consumer confidence index dropped nearly eight points in June to 50.4, the lowest reading since 1992.
"Consumers' assessment of present-day conditions continues to grow more negative and suggests the economy remains stuck in low gear," Lynn Franco, the group's director of consumer research, said in a statement.
Home Sales Inch Up
Following months of declines, sales of previously owned homes rose modestly last month amid lower prices, the National Association of Realtors reported Thursday.
Existing home sales rose by two percent in May to an annualized rate of 4.99 million, the Washington-based trade group said. Despite the gains, sales were 15.9 percent below a year ago. Since then, median sales prices have dropped by 6.3 percent to $208,600, the group reported.
"Home buyers are starting to get off the fence and into the market," Richard Gaylord, the group's president, said in a statement.
At the same time, new home sales continued to decline last month, dropping by 2.5 percent from April to an annualized rate of 512,000, the Commerce Department reported Wednesday.
About a third of the nation's small businesses are financed with home equity loans.
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