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Optimism Among U.S. Small Businesses Retreats to Five-Month Low

Sentiment among U.S. small companies took a step back in March.

Optimism Among U.S. Small Businesses Retreats to Five-Month Low
Employees use sewing machines to stitch seat covers for Volkswagen AG e-Golf automobiles at the Prevent Material plant, a unit of Prevent Group, in Gorazde, Bosnia (Photographer: Oliver Bunic/Bloomberg)  

(Bloomberg) -- Sentiment among U.S. small companies took a step back in March as a smaller share of owners said they expected business conditions to improve in coming months, a possible reflection of concerns about the economic impact from tariffs.

Expansion plans and sales expectations also eased, pushing the index of small-business optimism to a five-month low of 104.7, according to the National Federation of Independent Business. In February, the group’s gauge of sentiment advanced to 107.6, the second-highest level in the survey’s 45-year history.

Optimism Among U.S. Small Businesses Retreats to Five-Month Low

While the NFIB doesn’t explicitly ask respondents why they are more upbeat or less confident, eight of the 10 components that make up the index declined in March. That may indicate tariffs on some imported steel and aluminum, along with heated rhetoric between U.S. and Chinese officials over proposed trade actions, could be playing a role in tamping down sentiment.

At the same time, the index remains near a record and the report contained some promising aspects about the economy. A measure of earnings trends was the second-best since 1987 and a greater share of small-business owners reported higher average selling prices. The latter helps explain why Federal Reserve policy makers have been raising interest rates.

Last week, the NFIB reported that a net 33 percent of small firms raised compensation during the month, the largest share since November 2000, as hiring plans picked up.

To contact the reporter on this story: Vince Golle in Washington at vgolle@bloomberg.net.

To contact the editor responsible for this story: Scott Lanman at slanman@bloomberg.net.

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