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  • Writer's pictureThe San Juan Daily Star

Majority of small businesses believe US is in recession

More than half of U.S. small business owners believe the economy is already in a recession, marking a slight decrease between July and April, despite most firms reporting their own financial condition was strong, a survey released on Monday showed.


The survey conducted in July from the National Federation of Independent Business focused mainly on small businesses’ views on the state of banking and their credit needs, and also showed small businesses are much less worried about the health of their bank than they were in the immediate aftermath of this spring’s bank failures, including that of Silicon Valley Bank.


On the economy, 52% of small business owners said they believe the economy is already in a recession, down from 55% in April, the survey found. That belief comes despite broad signs of strength across the economy and growing body of evidence that the economy could avoid a long-anticipated downturn.


Recent indicators have shown strong retail sales and rising spending on services, the two largest small business industries. Moreover, businesses see their own financial condition as strong and their local economies relatively healthy.


For instance, more than two-thirds of all firms said that the financial state of business was “excellent” or “good,” a slight decline since April, but still strong as consumer spending continues to surpass expectations, and expectations for third-quarter gross domestic product growth continues to get revised upwards. On top of that, 80% of firms reported that the local economy was at least “okay.”


Optimism about the banking sector improved as well, recovering from the second-biggest U.S. banking collapse on record in March, as over half of all owners were not at all concerned about the health of their bank, an increase from 31% in April. There was heightened concern among small businesses at the outset of the collapse since 80% of all small businesses use a small, mid-sized or regional bank for financial needs.


The increased cost of borrowing after 525-basis points worth of tightening from the Federal Reserve since March 2022 continued to be the greatest source of concern for the majority of firms that have borrowed or tried to borrow since April.


European shares recovered from a six-week low and key U.S. treasury yields rose to decade highs on Monday as investors awaited a Federal Reserve meeting later this week.


Wall Street trading was mixed, with the Dow Jones Industrial and the S&P 500 giving back earlier gains while the tech-heavy Nasdaq Composite gained on earnings optimism.


Global benchmark oil futures fell after rising $1 a barrel, under pressure from potential interest rate hikes and uncertainty around Chinese demand.


The Dow Jones Industrial Average (.DJI) fell 121.76 points, or 0.36%, to 34,377.24, the S&P (.SPX) gained 9.62 points, or 0.22%, to 4,379.33 and the Nasdaq (.IXIC) gained 127.27 points, or 0.96%, to 13,418.46 by 1:18 p.m. ET (1718 GMT).


The pan-European STOXX 600 (.STOXX) ended higher, after rising as much as 0.9% intraday, recovering from Friday’s six-week low. Energy (.DXEP) and mining (.SXPP) sectors gained, tracking higher crude oil and metals prices.


Germany’s DAX (.GDAXI) rose 0.2% even as official data showed a higher-than-expected fall in German producer prices in July.


Adyen (ADYEN.AS) slumped 8.6% after two brokerages downgraded the Dutch digital payments firm’s stock after the company missed half-year expectations on Aug. 17.


Earnings from AI-darling Nvidia (NVDA.O) on Wednesday will be another major test of valuations.


“Wall Street is having a hard time deciding what to do with stocks,” said Edward Moya, senior market analyst with OANDA. “Everyone is expecting an impact from the surge in yields, but it seems like tech companies have held up. Nvidia is going to be key.”

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