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Small business confidence sags as economic growth slows.

The mood of small business owners continued to sour in the second quarter according to a quarterly poll taken by the National Federation of Independent Business (NFIB). The NFIB small business optimism index dropped four points to 94 (1978=100), its lowest level since the fourth quarter of 1990.

NFIB Chief Economist William Dunkelberg pointed to a turnaround in the attitudes of small business owners in 1993. In the first quarter, when the index stood at 102.1, 38% of those polled believed the economy would improve in the six months ahead, while 11% expected a downturn. In July, only 9% looked for improved business conditions in the second half, while 41% expected a downturn.

Dunkelberg cited the slow pace of economic growth as the prime reason for sagging small business confidence. He expected the economy to grow at less than a 2% annual rate in the second half of 1993 as new taxes, more defense cuts and weakness in U.S. trading partners' economies took their toll.

As a result, small business jobs might be harder to find. Companies planning to increase employment in the third quarter fell to 13% of those polled, a decline of five percentage points from the previous survey. Companies planning employment cutbacks climbed to 12% of those polled, up from 11%.

James R. Downey, owner and president of Kaune Corp., a food retailer in Santa Fe, New Mexico, agreed the outlook for economic growth was limited. "Any hopes have been dashed," he said, "by nex taxes and the potential for additional health care costs." He added, "I just received a notice from a supplier announcing that it had raised prices for the first time in four years specifically because of higher taxes on subchapter S corporations." He concluded, "The NFIB's growth forecast for the second half of the year might be on the optimistic side."
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Publication:Journal of Accountancy
Article Type:Brief Article
Date:Nov 1, 1993
Previous Article:1993 Federal Financial Management Status Report issued.
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