Small business optimism weak but improving
Press release from the issuing company
Wednesday, May 12th, 2010
According to the recent Wells Fargo/Gallup Small Business Index survey, conducted in April, business owners appear to be regaining their footing, albeit at a measured pace.
Concluded April 16, the latest Wells Fargo/Gallup Small Business Index optimism score came in at negative 11 (-11), a five-point improvement from the previous survey (conducted in January 2010). Owner optimism has improved 10 points from the survey low of -21 (conducted in July 2009), which represents an upward trend over the past three quarters. A score of zero indicates that small business owners, as a group, are neutral – neither optimistic nor pessimistic – about their companies’ situations.
“As consumer and business spending appeared to pick up pace, this bolstered small business owners’ optimism around their current situation,” said Dr. Scott Anderson, Wells Fargo senior economist. “In our latest survey, we see more small business owners describing their cash flows and current financial situation as good and higher percentages seeing an increase in revenues over the last 12 months. However, business owners remain skeptical about the sustainability of this current upturn.”
The Index is the sum of “present situation” and “future expectations” of small business owners for six key measures, including financial situation, cash flow, revenues, capital allocation spending, job hiring and credit availability.
The “present situation” improved seven points from negative 29 (-29) in January 2010 to negative 22 (-22). “Future expectations” declined slightly from 13 to 11.
Of the six key measures in the survey, the following two measures related to the "present situation" served as main drivers of the Index score during this survey:
Present Situation:
- Current Financial Situation – 54 percent rated their company’s current financial situation as somewhat or very good today, up from 48 percent in Q1 2010
- Cash Flow – 42 percent rated their cash flow as somewhat or very good for the past 12 months, up from 39 percent in Q1 2010
About the Small Business Index
For the last 28 quarters, the Wells Fargo/Gallup Small Business Index has surveyed small business owners on current and future perceptions of their business financial situation. The Index consists of two dimensions: 1) Owners’ ratings of the current situation of their businesses and, 2) Owners’ ratings of how they expect their businesses to perform over the next 12 months. An Index score of zero indicates that small business owners, as a group, are neutral -- neither optimistic nor pessimistic -- about their companies’ situations. Results are based on telephone interviews with 605 small business owners in all 50 United States conducted April 12-16, 2010. The overall Small Business Index is computed from a formula that scores and sums the answers to 12 questions— six about the present situation and six about the future. The overall Index can range from -400 (the most negative score possible) to +400 (the most positive score possible), but in practice takes on a much more limited range. The margin of sampling error is +/- four percentage points.
For the last 28 quarters, the Wells Fargo/Gallup Small Business Index has surveyed small business owners on current and future perceptions of their business financial situation. The Index consists of two dimensions: 1) Owners’ ratings of the current situation of their businesses and, 2) Owners’ ratings of how they expect their businesses to perform over the next 12 months. An Index score of zero indicates that small business owners, as a group, are neutral -- neither optimistic nor pessimistic -- about their companies’ situations. Results are based on telephone interviews with 605 small business owners in all 50 United States conducted April 12-16, 2010. The overall Small Business Index is computed from a formula that scores and sums the answers to 12 questions— six about the present situation and six about the future. The overall Index can range from -400 (the most negative score possible) to +400 (the most positive score possible), but in practice takes on a much more limited range. The margin of sampling error is +/- four percentage points.
