While energy costs continued to boost prices at both the wholesale and retail levels, the nation's small-business owners were remaining optimistic heading into the new year. Here's a look at this week's economic developments and how they may impact your business.

Owner Optimism Up
Anticipating an upturn in cash flow and revenue, the nation's small-business owners were in a more upbeat mood at the end of 2006 than earlier in the year, according to a national survey released Tuesday.

The Wells Fargo/Gallup Small Business Index, which measures the financial expectations of small-business owners, rose four points over the fourth quarter to 114, its highest level since the surveys were launched in August 2003.

The quarterly index is based on a survey of about 600 small businesses nationwide.

As many as 75 percent of owners polled said they expect cash flow to pick up in the year ahead, while 63 percent expect revenue to increase, the survey said.

"While many economists are forecasting a weaker economic environment for 2007, small-business owners are, according to the results, expressing no signs of an economic downturn," Scott Anderson, senior economist at Wells Fargo, said in a statement.

By contrast, a survey released last week by the National Federation of Independent Business, a Washington-based lobby group, said owner sentiment in December was on a downturn.

Consumer, Producer Prices Rising
Energy costs pushed consumer and producer prices up in December, the Labor Department said this week.

Prices paid by the nation's manufacturers rose 0.9 percent in December, driven by a 7.1 percent increase in gas prices and a 26.3 percent increase in prices for fresh fruit, the agency reported Wednesday.

Excluding energy and food costs, core producer prices rose a modest 0.2 percent, the report said. Still, manufacturers paid more for goods used in all stages of production, including finished goods, intermediate materials and supplies, and crude materials, the report said.

Meanwhile, higher gas prices drove up consumer prices in December by 0.5 percent, the first increase in four months, the agency said in a separate report Thursday.

Excluding a 4.6 percent increase in energy prices, core consumer prices rose by 0.2 percent, the sharpest rise in three months, the report said. Lower energy costs had kept core prices flat over much the fourth quarter last year.

For the year, core prices rose 2.6 percent, compared to 2.2 percent in 2005, while overall consumer prices rose 2.5 percent, the smallest rise since a 1.9 percent increase in 2003.

Industrial Production Up
Despite higher costs, ramped up output in the high-tech and auto sectors boosted industrial production by 0.4 percent in December, the Federal Reserve reported on Wednesday.

Industrial production had slowed by 0.1 percent in each of the three previous months, dragging overall production down over the fourth quarter by 0.5 percent, the report said.

For the year, total industrial production rose 3.0 percent, while capacity expanded by 2.4 percent, the report said.

On Tuesday, the New York Federal reserve reported activity in the state's factories had dropped in January to its slowest pace in more than a year. The Fed's closely watched Empire State manufacturing index fell to 9.13 from 22.19 in December, driven down by fewer new orders and higher prices paid for raw materials, according to the report.

The index is considered an early indicator of monthly manufacturing activity nationwide.

Housing Starts, Permits Rebound
Housing starts in December rose 4.5 percent to a seasonally adjusted annual rate of 1.642 million, while housing permits rose 5.5 percent to 1.596 million, the Commerce Department reported Thursday.

Housing permits, a gauge of the near-term strength of the residential construction sector, dropped to a total of 1,833,5000 last year, a 14.9 percent decline from 2005, the report said.

Jobless Claims Fall
New claims for unemployment benefits dropped last week by 8,000 to 290,000, the Labor Department reported Thursday.

The insured unemployment rate in the week ending Jan. 6 rose by 0.1 percent to 1.9 percent nationwide, the report said.

The biggest decreases last week were in Michigan, Wisconsin, and Pennsylvania, while increases were reported in New York, North Carolina, and Georgia.