Reflecting a deepening gloom over the health of the U.S. economy, the nation's small-business owners reported the lowest level of confidence in business prospects for the third quarter since the 1982 recession, according to a survey issued yesterday.
Optimism declined broadly across 10 categories, according to a July report by the National Federation of Independent Business.
The federation, a trade group, also concluded that the economy is unlikely to pick up steam in the fourth quarter, particularly in light of the Iraqi invasion of Kuwait. The survey was taken before the turmoil in the Middle East.
"I would interpret this as a reflection of the very slow growth in the economy," said Lyle E. Gramley, chief economist for the Mortgage Bankers Association of America.
"If you look at the economic numbers as they've been coming in recently, they've been quite soft. They don't suggest to me that we're in a recession, but that we're very close to a recession."
The federation's survey, conducted quarterly since 1974, assesses a wide range of small-business activity including hiring, pricing, sales, borrowing and economic conditions in general. The findings are seasonally adjusted and are rated against an index.
Overall, business optimism for the quarter was rated at 98.2, based on a 1974 standard of 100.
According to the nationwide poll of 2,158 businesses, credit remains accessible and labor costs and inflation are under control.
But the portion of managers predicting a downturn in the economy leaped to 22 percent for the third quarter from 14 percent in the second quarter.
At the same time, employment gains are projected only at an additional 0.02 workers per firm for the new quarter compared with 0.19 at the same period last year and 0.10 in 1988.
"It tells us the negative news that's been hitting Wall Street and the economists over the past six months is really beginning to hit home," said Terry Hill, a federation spokesperson.
In particular, concerns about the continuing impasse over the federal budget deficit and the savings and loans crisis have made small-business people "skittish," Hill said.
Recently, the U.S. Chamber of Commerce predicted estimates of real growth in annual gross national product would be lower than the 1.1 percent now projected.
The National Association of Manufacturers also reacted to the leveling off of industrial production in July by warning that the Iraqi oil crisis could lead to a recession. The experience of local business operators "squares with what we see in the numbers," Gramley said. "This really is a slowing down in the economy they're not going to get revised away later."