The Quarterly Indicators report provides recent monthly and quarterly data from a wide variety of sources relevant to small businesses. Economic activity of small firms is examined at the national level.
Trends
The economy grew at an annualized 3.4 percent in the second quarter. Much of this growth is owed to increases in net exports and private investment (especially non-residential construction, which rose an annualized 8.1 percent). Real personal consumption grew more slowly than in previous quarters. Industrial production and the purchasing managers' index for manufacturing were also up. New housing starts continued to fall, with a 6.3 percent annualized decline in the second quarter.
Small businesses and consumers were more pessimistic about the future than in the previous quarter. The National Federation of Independent Business optimism index fell to 96.0 in June, and there was virtually no change in small business owners' attitudes toward expanding their firms or hiring new workers. These measures are lower than historical averages. The University of Michigan's consumer sentiment survey was also lower in the second quarter. Despite the surveys' findings, the economic and employment situation during this quarter were relatively favorable; the public's mood seems to reflect such factors as higher energy costs and the housing slowdown.
The unemployment rate for April, May, and June was 4.5 percent. It has been essentially unchanged for the past year. Meanwhile, the economy generated 2 million net new jobs from June 2006 to June 2007, with 436,000 of these created in the second quarter. Every industry except for construction, manufacturing, and retail trade gained jobs during the quarter, and over half of the net new jobs occurred in education & health services and leisure & hospitality. Self-employment levels remained constant.
Short-term interest rates changed little in the second quarter, after successive increases over the past few years. The rates charged on loans of less than one month rose slightly, but rates on loans from 31 days to one year fell by 0.1 percentage points. The Federal Reserve's Senior Loan Officers' Survey showed that demand for small loans has weakened, and that more banks are tightening their lending standards on small commercial and industrial loans for the first time since 2003. In the first two quarters of 2007, the total amount of venture capital invested increased 9 percent over the same quarters in 2006; the number of deals was up 3 percent.
While core inflation (which excludes energy and food prices) grew an annualized 2.3 percent, the overall consumer price index grew by an annualized 5.2 percent. Higher food and energy costs account for a significant portion of the nation's current inflation. Producer prices rose even faster. The cost of West Texas crude oil was up nearly $7 per barrel since March.
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Information courtesy of the Small Business Administration.
