U.S. Small-Business Confidence Improves Slightly, Survey Shows

Small-business owners' confidence about their economic

prospects remained lackluster last month, as businesses grapple with more discerning consumers and brace for worsening conditions in the months ahead.

The National Federation of Independent Business's small-business optimism index, based on a survey of about 500 owners, edged up to 95.2 in December from 94.8 in November. Economists surveyed by The Wall Street Journal expected a reading of 95.0.

Though it recovered some ground lost in November, the index is "stuck in a below average rut," according to the trade association. The historical average for the measure is 98.

Six of the index's 10 components improved from a month earlier, paced by a rebound in a measure of sales, but a sharp drop in a gauge of future expectations nearly offset the gains elsewhere.

Owners expect their own sales to improve in the coming months, but, outside of vehicles and health care, spending hasn't grown strongly, the NFIB said. A smaller share of business owners reported higher sales while a bigger share indicated lower sales in December, and the number of those flagging soft sales as their top business problem rose.

Despite steady job growth and deep savings from cheap gasoline, an uncertain global economy and weak wage growth has kept a lid on consumer spending and prompted more saving. At the same time, many businesses have been reluctant to

step up spending on the basic building blocks of the economy, such as machines, computers and new buildings.

Looking ahead, owners said they anticipate a deterioration in business conditions over the next six months amid shrinking pricing power. As such, plans for capital investment and inventory spending were little changed in December.

Hiring faded last month, though 16% of businesses surveyed--especially those in the beaten-down manufacturing sector--suggested they still plan to add workers in the coming months. Nearly a quarter of respondents said they raised worker compensation in December, unchanged from a month earlier, and a fifth still plan to lift compensation in the first half of the year. That is as significant slice of owners continue to report difficulties in finding qualified workers to fill open jobs.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com