WASHINGTON, April 12 U.S. small businesses grew
less optimistic about the economy in March but raised prices
for a second straight month, a potential warning sign about
inflation, a survey showed on Tuesday.
The National Federation of Independent Business' overall
optimism index slipped 2.6 points to 91.9 as owners anticipated
a slowdown in economic activity over the next six months and
few saw higher real sales growth.
Although businesses were pessimistic about sales, a net
nine percent reported raising prices, up from 5 percent in
February -- when the price gauge swung into positive territory
for the first time in 26 months. The survey was conducted
through March 31 and covered 811 businesses.
"The bad news for the Fed is that price pressures continue
to mount," the NFIB said in a statement. "It is not clear why
owners expect a deterioration in the economy over the next six
month. GDP and employment growth have not been spectacular, but
have maintained positive momentum."
Rising food and energy prices are putting upward pressure
on headline inflation, but Federal Reserve officials expect the
impact to be temporary. The U.S. central bank tracks core
inflation, which excludes food and energy prices, for monetary
Indications are that rising commodity prices and bad
weather held back economic growth in early 2011 after expanding
at a 3.1 percent annual rate in the fourth quarter.
The NFIB survey showed sluggish sales remained a major
hurdle, with the share of owners expecting higher real sales
declining eight percentage points to 6 percent.
It found that 24 percent of respondents planned to raise
average selling prices, many by 10 percent or more. The NFIB
attributed the planned price hikes to the elimination of
unwanted inventory, noting that some increases started long
before the commodity price spike.
"The 'fire sale' is over and profits are badly in need of
some price support," the NFIB said.
Although hiring plans eased in March, job creation
remained in positive terrain, with 18 percent of owners looking
to add workers over the next three months and six percent
planning to reduce their workforce.
"The largest hole in the employment picture remains
housing, a million housing starts short of 'normal' and all the
associated jobs missing," the NFIB said.
Employers added 216,000 jobs in March, the government
reported early this month. Despite concerns about weak sales,
more businesses planned capital investment and and many
continued to liquidate unwanted inventory -- but at the lowest
frequency in 35 months, the NFIB said.
(Reporting by Lucia Mutikani, Editing by Chizu Nomiyama)