Economic Roundup: Owner Optimism Down, Consumer Confidence Falling

Nagging cash-flow issues continue to plague the nation's small-business owners, while a weaker job market has consumers more worried about the economy. Here's a look at this week's economic developments and how they may affect your business.

Owner Optimism Down

Small-business owners' confidence in the economy fell to a record low in September, driven down by continued cash flow problems, Discover reported Monday.

Of 1,000 owners surveyed nationwide, 46 percent reported cash-flow problems within the past 90 days, up from 41 percent in August and 35 percent in July.

For the first time since being launched over a year ago, Discover's monthly small-business confidence index fell below its benchmark level of 100, dropping to 99.2.

"Cash-flow constraints are a very tangible sign that can move the index," Sastry Rachakonda, director of Discover's business credit card, said in a statement. Owner confidence has been fading for the past few months, he added.

Despite the downturn, 36 percent of respondents said they planned to spend more on business development in the month ahead, up from 34 percent in August.

Consumer Confidence Falling

A weaker job market in September dragged consumer confidence in the economy down to its lowest level in nearly two years, the Conference Board reported Tuesday.

In a survey of 5,000 households nationwide, 25.7 percent of respondents described the economy as "good," down from 26.2 percent in August, while 17.9 percent described it as "bad," up from 16.3 percent, the New York-based private research group said.
More respondents also said they expected conditions to worsen in the months ahead, especially in the labor market.

"Looking ahead, little economic improvement is expected and with the holiday season around the corner this is not welcome news," Lynn Franco, the director of the group's consumer research center, said in a statement.

On Thursday, the Commerce Department revised the nation's second-quarter economic growth down from 4 percent to 3.8 percent, citing a downturn in residential fixed investments.

New-Home Sales Plunge

Sales of new single-family homes dropped by 8.3 percent in August to an adjusted annual rate of 795,000, a decline of 21.2 percent from August 2006 and the slowest pace in over seven years, the Commerce Department reported Thursday.

The slowdown saw median prices fall by 7.5 percent to $225,700, while 529,000 new homes were left on market at the end of the month — enough for an 8.2 percent supply at the current sales pace, the report said.

Gas Prices Up

Following declines in recent weeks, average gas prices rose by 2.5 cents to $2.812 per gallon as of Sept. 24, 43.4 cents higher than the same period last year, the Energy Information Administration reported Wednesday.

Gains were reported across all regions, except the Rocky Mountains, where prices fell by a modest 0.7 cents to $2.817 per gallon. The biggest increase was in California, which saw prices climb by 5.7 cents to $2.961 per gallon.

Jobless Claims Fall

The number of new claims for unemployment benefits dropped by 15,000 last week to 298,000, the Labor Department reported Thursday.

The nation's insured unemployment rate was unchanged the previous week at 1.9 percent, with some 2.551 million people filing jobless claims.

The biggest declines last week were in Michigan, Wisconsin, and Ohio, while the biggest gains were in California, Florida, and South Carolina.

More From Fast Company:

The Most Innovative Ways to Nap

The Top 10 Family Entertainment Attractions

2007 Masters of Design

The CEO Who's, Like, 17

Start-Up Secrets from Today's Coolest Young Entrepreneurs