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Small Business Optimism Slips in August

Small business optimism fell in August, with owners less likely to expand business operations despite little impact from problems in the credit sector, according to a survey released Tuesday.

The National Federation of Independent Business said its index of small business optimism fell 1.3 points in August to 96.3 and remained below its historical average of 100.2 for 17 of the past 18 months.

Small business proprietors have been somewhat immune to the credit problems that have hampered larger firms.

"There is no real evidence that credit standards are being tightened and credit remains as available as it has been for years," said William Dunkelberg, NFIB chief economist. "It's just more expensive."

Only 3 percent of the small business owners surveyed cited the cost and availability of credit as their biggest problem, well below the 37 percent in 1982, NFIB said.

Thirty-five percent of the business owners said all their credit needs were met, compared with just 4 percent having problems obtaining desired financing, NFIB said.

Nine percent of those polled expect credit conditions to ease in the coming months, down 3 percentage points from July.

Hiring remains a difficult problem for many small business owners. They said they would hire more workers if qualified applicants could be found.

Twenty-five percent of the firms reported unfilled jobs still open, up 2 points from July. During the next three months, 15 percent of the owners plan to create new jobs, up two points from July, the group said.

Job creation was strongest in manufacturing and weakest in retail, the group said. East South Central and West South Central states were doing the most hiring, while the weakest region was in the East North Central states.

Labor costs, the largest cost of doing business for most small firms, continued to pressure earnings in August with 24 percent reporting higher worker compensation, putting a dent in profit trends, NFIB said.

This was down 3 points from July, but high compared with 2003, when readings fell as low as 15 percent, the group said. The results are based on 720 respondents to the August survey of a random sample of NFIB member firms polled through Aug. 28.

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