Small business confidence in the US economy tumbled for the second straight month in November because of worries that economic growth will slow, a survey released on Tuesday showed. The National Federation of Independent Business said its index of small business optimism fell 1.8 points to 94.4 in November from October to its lowest since 1993.
After the September 18 Federal Reserve rate cut, small business firms cut spending and hiring plans, the NFIB said. Small business expectations weakened further following a second rate cut in October and forecasts for slower economic growth.
"Things were looking good on Main Street until the Fed warned that the economy was at risk of sinking," said NFIB Chief Economist William Dunkelberg. "That warning had credibility, and the logical response was to cut hiring, capital spending and other growth-related activities," Dunkelberg said. "And indeed that occurred in the last 12 days of September and continued into October and November."
Wall Street widely expects the Federal Reserve to cut the benchmark federal funds rate on Tuesday, probably by 25 basis points. The rate now stands at 4.50 percent.
The cut in interest rates will do little to spur new home construction with such an overhang of supply, he said. "The recovery of new home construction is likely to be very uneven as most of the overbuilding occurred in a few geographic areas such as California, Florida and Las Vegas, where foreclosures are very high, Dunkelberg said.
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