Small business morale falls slightly in June

WASHINGTON (Reuters) - Confidence among U.S. business owners slipped last month amid expectations of weak sales and a deterioration in business conditions over the next six months, a survey showed on Tuesday.

The National Federation of Independent Business' optimism index dipped 0.1 point to 90.8 last month from May.

Continued pessimism among small business owners could add to fears that the economy might take longer to dig out of the soft patch it has been trapped in since the beginning of the year.

The economy stumbled in the first half, buffeted by high commodity prices and supply chain disruptions after the March earthquake in Japan.

Hopes that growth would regain momentum by the third quarter were dampened somewhat by data on Friday showing that employment stalled in June, with nonfarm payrolls rising a mere 18,000 after gaining just 25,000 in May.

"There is not much to be optimistic about as a small business owner," the NFIB said in a statement.

The NFIB survey's gauge of business conditions over the next six months dropped 6 points in June, while its measure of sales fell 3 points. The survey covered 766 small businesses and was conducted through June 30.

With sales anticipated to be weak, fewer businesses plan to raise average prices in the next few months than in May.

That supports the Federal Reserve's contention that the recent spike in inflation would be temporary.

Still, the weak sales outlook bodes poorly for investment in inventories. Businesses generally did not plan to order more stock, according to the survey.

"Large manufacturers and wholesalers will begin to notice a weakness in orders and inventories building," the NFIB said.

Government data last week showed inventories at wholesalers starting to pile up in May as sales dropped. A similar pattern is expected with business inventories for May, scheduled for release on Thursday.

But there are some glimmers of hope on the horizon. While small businesses laid off workers in June, there was an increase in the proportion of owners planning to create new jobs over the next three months.

There was also a rise in the number of businesses saying they could not find workers to fill current positions.

(Reporting by Lucia Mutikani; Editing by Leslie Adler)