By Agency Reporter

Wednesday, 10 Nov 2010

WASHINGTON: Confidence among United States small businesses rose in October to the highest level in five months as more companies projected sales gains and an improving economy, a private survey found.

Bloomberg reported on Tuesday that the National Federation of Independent Business‘s optimism index increased to 91.7 from a September reading of 89. Seven of the index‘s 10 components rose and three declined. The measure, which averaged 100.6 in the five years before the recession began, has been below 93 since January 2008.

To help broaden the recovery, smaller firms need to increase hiring. A measure of job creation was little changed and capital spending plans declined, signaling a pickup in the world‘s largest economy will be slow to develop.

”The private sector will continue to slog ahead,” the group‘s chief economist, Mr. William Dunkelberg, said in a statement.

October’s gain in optimism is ”not a huge move, but at least a decent jump, perhaps anticipating an acceleration in economic activity or a change in the ‘management team‘ after the election,” he said.

The gauge of expectations for better business conditions six months from now jumped 11 percentage points to eight per cent in October, the report showed.

The measure of respondents planning to hire over the next three months rose four points to a net one per cent, according to the report.

Eight per cent of businesses said they plan to hire, unchanged from the prior month. Fewer indicated they plan cut staff, with 13 per cent anticipating workforce reductions, down 3 points from September.

Average employment growth was unchanged in October, after falling in all but two quarters since April 2007, which ”raises the odds that Main Street may contribute to private sector job growth for the first time in over a year,” Dunkelberg said.

A gauge of whether firms think this is a good time to expand increased by one point to seven per cent, while 73 per cent said it is not, the survey said.

Plans for capital investment over the next few months fell one point to 18 per cent. A net minus four per cent plan to add to inventories, down one point from September.

The survey‘s net figures are calculated by subtracting the percent of business owners giving a negative answer from those giving a positive response and adjusting the results for seasonal variations.

The net share of owners projecting higher sales, adjusted for inflation, increased four points to one from minus three the previous month. The index of earnings trends also increased, by seven points, to minus 26 per cent.

Limited demand continued to keep inflation at bay, the survey showed. October was the 23rd straight month that showed more small business owners cutting average selling prices than raising them.

Private payrolls jumped by 159,000 workers in October, more than forecast and the most since April, while the jobless rate held at 9.6 per cent, Labor Department figures showed last week.

The report showed total payrolls, including government agencies, increased by 151,000 following a revised 41,000 drop the prior month that was smaller than initially estimated.

Source: Punch