Newspaper article THE JOURNAL RECORD

Small-Business Survey Shows Inflationary Thrust Blunted

Newspaper article THE JOURNAL RECORD

Small-Business Survey Shows Inflationary Thrust Blunted

Article excerpt

An inflationary thrust that began in 1987 and seemed to be gathering momentum was blunted in July, according to a small-business survey with a record of accuracy.

``What appeared to be an inflation-gathering-steam has suddenly dissipated,'' said Prof. William Dunkelberg, who conducts the survey for the National Federation of Independent Business.

Dunkelberg, dean of Temple University's school of business and management, said the change was clearly reflected in written responses from 1,851 small- and medium-size businesses, and was abrupt and substantial.

Prior to the latest survey, responses showed actual and planned price increases had steadily increased for nearly two years, raising until recently the fear of a broad-based resurgence of inflation.

That fear was shared by many economists, the Federal Reserve Board and even by some White House advisers, but based on the latest responses, Dunkelberg said that ``at least for the moment, the momentum in prices has been blunted.''

The survey, which examines existing conditions and attitudes about the future of prices, hiring, inventories, borrowing and other factors, seeks to obtain an indication of economic conditions six months hence.

Many of these indicators are then synthesized and expressed in a ``Small Business Optimism Index,'' which last month rose slightly to 99.8 from 99.5 in the second quarter of this year.

For comparison purposes, the third quarter of 1975 is assumed to be 100, meaning the latest index approximates the expectations of small and mediuum-size businesses at that time.

The index, begun in 1974, reached its highest reading of 108.7 in the first quarter of 1984, and remained above 100 with just two exceptions until the second quarter of this year. Its low was 81.1 in the second quarter of 1980.

The latest measurement, said Dunkelberg, suggests a modest improvement over the second quarter in the outlook for business conditions and business expansion, although the future of the economy as a whole stays a bit negative. …

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