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US small business confidence ebbs in March, prices up

Industry News

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, according to a recent survey.

Reuters | April 12, 2011

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 9 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 policy purposes.

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.

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