"The rate at which this pessimism is translated into spending reductions will determine how quickly the economy cools down," says William C. Dunkelberg, the federation's chief economist. Overall, 29% of entrepreneurs expect the economy to weaken over the next six months, up 8 points from the November survey. Only 14% expect the economy to strengthen.
Companies planning to hire outnumbered by 13% those planning to hold steady or retrench on the jobs front. And while 70% reported capital spending in the last half of the year -- a near record -- only 34% are planning capital outlays in the immediate future. Meanwhile, more small businesses see inventory reductions (18%) than additions (14%). Now that business holiday-season spending is over, these numbers suggest the next couple of quarters will be more lean than the year just past. By Theresa Forsman in New York