Jul 28, 201102:30 PMBlog

Small business owner optimism holds steady

Jul 28, 2011 - 02:30 PM
Small business owners' optimism holding steady at zero - neither optimistic nor pessimistic - as confidence expressed about the present financial situation wasn't enough to offset lower expectations for future revenue and capital spending allocation, according to third quarter results from the Wells Fargo/Gallup Small Business Index.

"Business owners are demonstrating a reluctance to invest in their businesses and are holding onto cash," said Doug Case, Wells Fargo small business segment manager. "In recent months, we've seen strong growth in deposit balances as business owners prepare for potential business challenges and save for future opportunities." The third quarter index score included improvements in sentiment regarding small business owners' financial situation, cash flow, hiring and credit availability over the past 12 months, leading to a four-point improvement in the survey's "present situation" from negative 14 to negative 10 - a survey metric that has been in negative territory since the first quarter of 2009.

Offsetting the quarter's improvement were significant declines in expectations for revenue and capital spending over the next 12 months. All six measures of the index showed declines in the future expectations component, which fell four points to 10 this quarter.

"Sales and demand clearly remain challenged," said Dr. Scott Anderson, Wells Fargo senior economist. "Rising inflation and gasoline prices combined with renewed weakness in U.S. job creation has undermined consumer confidence and their ability to spend."


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