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SMB Optimism Declines

Posted on 12.06.2015

Small business optimism is declining according to the latest quarterly small business survey from Wells Fargo.

The Wells Fargo/Gallup Small Business Index, which was conducted November 9-13, shows that the overall Index score slipped from 59 in August to 54 in November, which is the lowest score since July 2014. It is also the third quarter in a row that the score has dropped after starting the year at 71 percent, which was the highest score in seven years.

According to the fourth quarter study, a major contributor in this year’s decline in optimism is the drop in the number of business owners reporting increases in company revenue. Other contributors include a decline in business owner perceptions of their financial situation, capital spending and hiring.

“This has been an unusually slow economic recovery for everyone, and small business owners are certainly feeling that,” said Mark Vitner, managing director and senior economist for Wells Fargo Securities. “With the economy growing as slowly as it has been, it’s been difficult for many business owners to increase their sales, and this has been particularly burdensome for firms who have seen expenses rise, including healthcare costs. As a result, many have been reluctant to invest in equipment, expand their operations and hire staff, even as business owners in general have seen gradual improvement in their financial situation and cash flow over the last few years.”

It is also important to note that the survey found 39 percent of small business owners reported that their company revenues increased a little or lot in the last 12 months, which is a 10 percentage point drop from the first-quarter survey. What’s more, 47 percent of business owners expect their revenues to increase in the next 12 months compared to 55 percent at the start of the year.

Additional data shed light on small business debt, revealing that 40 percent of business owners are comfortable with the amount of business debt they currently carry, which is up from 29 percent in April 2013. Moreover, just 10 percent of business owners expressed difficulty paying down their current business debt, compared to 18 percent in April 2013.

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