Small-business owners expect U.S. economic growth to slow from the first quarter of 2006 as they foresee weakening business conditions during the next six months, according to a private sector survey.
The National Federation of Independent Business reported on Tuesday that its index for small business optimism shed 1.6 points, falling to 98.5 in May .
"It's hard to beat the first-quarter performance, so a 'slowdown' is definitely going to happen," William Dunkelberg, NFIB's chief economist, said in a statement. "The only question is how far and how fast."
"For some observers, this might be the signal of a turning point for the economy, marking a slowdown in economic activity," Dunkelberg said.
But Dunkelberg said the slowdown is coming from strong levels, "so overall the economy is still looking fairly good."
The decline came on the back of a reduction in job openings and capital spending plans, and an increase in the number of small-business owners "who believe business conditions will be worse in six months than they are now," the report said.
Fifty-six percent of small business owners hired or tried to hire one or more workers in May. However, of that total 84 percent of these owners reported few or no qualified applicants for the positions they were trying to fill.
During the next six months, 26 percent of the firms plan to create new jobs and five percent plan workforce cutbacks.
The NFIB data suggests the job market is tight with strong intentions to hire frustrated by the lack of qualified applicants, Dunkelberg said.
Job creation plans were especially strong in construction and the wholesale trades, the NFIB said, adding that "small firms in the construction industry still have not planned for a substantial slowdown in housing demand."
The survey found only 28 percent of all firms plan to make capital expenditures over the next few months, compared to 33 percent in April.
Dunkelberg said the decline in capital spending plans can also be "understood after months of solid capital spending and expectations of some slowing in the economy."
Inventories are lean, having been drawn down by strong sales in the first quarter, "a deficiency that owners plan to cure in the second quarter," the NFIB said.