Despite strong economy, small businesses cautious

NEW YORK» Although the economy is strong and consumers are optimistic, many small business owners are holding fast to their cautious approach to expansion.

The government’s latest estimate of secondquarter economic growth, released in late September, showed that the gross domestic product grew at an annual rate of 4.2 percent. Meanwhile, the Conference Board’s consumer confidence index rose to an 18year high last month.

But economic growth slowed in the justended third quarter to between 3 percent and 3.5 percent, economists say. That’s still strong, but their projections reflect an expected drop in exports. Some economists believe growth will continue to slow in the coming years as the impact of the tax cuts and increased government spending this year begin to fade. The Federal Reserve, which in September raised interest rates for the third time this year, is trying to ensure that growth doesn’t get out of hand.

Despite an economy that’s generally doing well, small business owners are staying conservative, the stance they’ve held since the Great Recession. That’s the finding of a thirdquarter survey of companies by researchers at Pepperdine University’s Graziadio School of Business and Management and Dun & Bradstreet Corp.

The survey found that just a third of small businesses — those with less than $5 million in revenue — plan to raise financing in the next six months. Fortythree percent don’t plan to raise financing, and 23 percent aren’t sure what they’ll do. When companies expand, they often seek financing for new equipment, property or employees.

An index showing demand for financing rose 2.4 percent from the second quarter, but that was down nearly 7 percent from the first quarter.

Owners base their growth decisions on how much revenue they’re taking in. And 7.9 percent are projecting higher revenue, in line with the 7.8 percent making that forecast in the second quarter but down from 10 percent in the first quarter.

Some owners have said they’re concerned about the impact of the Trump administration’s trade tariffs on goods imported from China and Europe, and the retaliatory tariffs countries have imposed on U.S. goods. The drop in exports economists expect would be due in part to the fact that companies and farmers rushed to ship their products before U.S. tariffs took effect, and exports will now fall back to more normal levels.

Meanwhile, U.S. importers, manufacturers and retailers are concerned that their profits will be hurt by tariffs on raw materials and finished products from other countries.

Still, small business owners are upbeat about their companies’ performance; in the Pepperdine/dun & Bradstreet survey, only 11 percent said they expected their companies would do worse this year than in 2017.