Small Business Owner Optimism Moves Higher

Small business owners showed growing confidence in the economic recovery with increased optimism for the second straight quarter, according to the new Wells Fargo/Gallup Small Business Index survey.

Measuring business owner optimism across the nation, the latest Index score rose another 16 points this quarter, lifting out of negative territory to reach 12. The Index has gained 40 points since July 2010, the largest two-quarter gain in optimism recorded since the beginning of the survey in August 2003.

“Small businesses are feeling much better about this economic recovery than they did two quarters ago,” said Dr. Scott Anderson, Wells Fargo senior economist.

“These gains in optimism exceed the improvement we saw between August 2003 and March 2004, when the last economic recovery gathered some momentum and stronger job growth ensued. It appears the change is driven by healthy gains in demand from consumers and businesses, which are leading to improvements in small businesses revenues and cash flows.”

The Index is the sum of “present situation” and “future expectations” of business owners for six key categories, including financial situation, cash flow, revenues, capital allocation spending, job hiring and credit availability. Looking forward, business owners expect improvements in their financial situation, revenues, jobs and access to credit over the next 12 months. Among these categories, they are most optimistic about increased revenues, with 54 percent expecting an increase of a lot or a little, up from 44 percent in Q4 2010.

“The latest results demonstrate a return to positive territory for the Index — and an important change in trajectory,” said Doug Case, Wells Fargo small business segment manager.

“We are seeing solid improvement from both the present situation and future expectation components of the Index. The increased optimism is encouraging and we find that many business owners remain cautiously optimistic — they’re keeping their doors open and looking for new business opportunities.”