2006 Predictions: What small businesses will face

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William C. Dunkelberg, chief economist at the National Federation of Independent Business, the nation’s largest small-business advocacy group, predicts that American consumers likely will be spending less on cars and new houses and instead will focus more on increasing their savings in 2006. “For many small firms, this will mean slower sales growth,” he says.

However, Dunkelberg says, government spending, especially in the hurricane-ravaged gulf states, will pick up some of the slack. He also predicts that:

l Energy prices will be lower, but not by a lot. “High prices have attracted a larger supply of oil and there has been some conservation. But long-term demand remains strong, so prices won’t fall much,” he says.

l Business spending will pick up. “The business sector is awash in cash and behind the curve in spending that money on investment. This is likely to pick up this year,” he says.

l Inflation could get a bit worse and interest rates a bit higher, both negatives for growth.

l Overall economic growth will not be as strong as in 2005, but it will be strong. “Expect another two million new jobs and tighter labor markets,” he says.

Dunkelberg bases his predictions on the NFIB Small-Business Economic Trends report, which has tracked small-business issues for nearly 20 years.