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Main St. commerce cools
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July 17, 2000: 5:49 a.m. ET
Small companies watch nervously as economy shows signs of slowing
By Staff Writer Steve Bills
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NEW YORK (CNNfn) - Patricia Boyers can feel the effect of higher interest rates at the mobile-home dealership that she and her husband run in Poplar Bluff, Mo.
"If their objective was to bring the economy to a screeching halt, they've succeeded," the entrepreneur complains.
On Main Streets across the nation, signs are growing that a series of rate increases by the Federal Reserve Board is beginning to slow economic growth.
 "Clearly, we're coming down," said William C. Dunkelberg, chief economist of the National Federation of Independent Business. The organization is reporting Monday that its "index of small business optimism" fell by 2-1/2 points in June, falling to its lowest level since the fall of 1993.
Other signs also point in the same direction. Government figures Friday provided further evidence that the U.S. economy is slowing, as the core rate of wholesale inflation remained in check and industrial production tapered off, both signs of cooling.
Small business watching cautiously
Even small businesses that are buffered from the direct effects of macro-level slowing are watching cautiously for factors that could dampen the market, such as rising fuel costs.
"I'm a little bit concerned" about gasoline prices, said David Allen, head of Allen Associates in Ayer, Mass., a manufacturer of florist supplies. His five-employee company makes products, such as the "corsage magnet," which allows someone to affix a flower to her dress without making a hole in the fabric with a pin. As such, his company doesn't participate in the retail economy directly.
Still, he worries.
"Ultimately, the consumer is going to be affected to the extent that they will have less discretionary money to spend," Allen warns. That in turn, will affect the florists who are the customers for his products.
Others, such as Boyers in Missouri, feel the impact more directly. "When you're in the mobile-home business, you sell payments," she said. Rising interest rates directly affect her customers' ability to buy her products, she said.
Responding to the slowing
There are some signs that companies are responding nimbly to the slowing economy, slowing job growth and cutting back on the hours that employees work. Banc of America Securities suggested last week that such a prompt response improves the nation's chances of an economic soft landing.
Skeptics counter that small companies run a greater risk of getting knocked around. With slower sales, firms have fewer units over which they can spread their fixed costs, said Dunkelberg, pointing to a finding in the NFIB survey that nearly 20 percent of respondents tried to raise prices in June in an attempt to shore up profits.
"It's competition that disciplines whether you can raise prices or not," he warned, noting that even big players such as airlines have difficulty making price increases stick.
As a result, Dunkelberg expects Main Street profits to fall as the economy continues to slow into the third quarter. 
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