WASHINGTON (Reuters) - U.S. small business confidence fell in June to its lowest level in more than a year amid expectations of weaker profits and a softening labor market, which could temper expectations for strong economic growth in the second half.
The National Federation of Independent Business said on Tuesday its Small Business Optimism Index dropped 4.2 points to 94.1, the lowest reading since March 2014, after scaling a five-month high in May.
“Not a recession signal, but not supportive of an optimistic view of growth in the second half. Unexpected events globally could make this worse ... a scenario for continued slow growth,” said William Dunkelberg, NFIB chief economist.
Coming on the heels of a disappointing June employment report and a slowdown in automobile sales, the downbeat confidence survey could raise fears that the economy lost some momentum at the end of the second quarter. The economy contracted at a 0.2 percent annual rate in the first quarter.
About 620 businesses took part in the NFIB survey. Nine of the index’s 10 components fell last month and one was unchanged.
Small business owners’ earnings expectations weakened sharply and their views on sales, which have been gloomy in recent months, deteriorated further. They were equally pessimistic about investing in capital and inventories.
There was a drop in the number of owners who said now was a good time to expand.
The survey’s labor market gauges also weakened last month. There was a decline in the share of small businesses reporting they were either hiring or trying to hire workers, as well as those reporting difficulties finding workers for open positions.
There was a rise in businesses hiring temporary workers. Wage growth measures also fell last month, with the share of small businesses planning to raise compensation in the coming months slipping to its lowest since October 2013.
The survey also suggested inflation pressures could remain benign for a while. The share of owners planning to raise prices rose marginally last month.
“But reports of actual hikes suggest that the economy has grown too slowly to support widespread price increases,” said Dunkelberg.
Small business owners’ perceptions about credit conditions were unchanged last month.
Reporting by Lucia Mutikani; Editing by Meredith Mazzilli