Small business index climbs, but hiring and spending outlook unchanged

A measure of optimism among small business owners has climbed to its highest level in nearly two years, although the outlook for hiring and capital spending hasn’t substantially changed.

The Wells Fargo/Gallup Small Business Index climbed four points to 68 for the third quarter, the highest reading since the first quarter of 2015. The index stood at 59 at this time last year.

“The latest Small Business Index score shows that while small business owners are more optimistic today than a year ago, many remain uncertain and cautious about what lies ahead,” said Lisa Stevens, head of small business for Wells Fargo. “After several years of slow, gradual improvement in business owner perceptions of cash flow, revenue and financial situation, this trends seems to have plateaued. In this election year, business owners are reporting little change in most metrics, including their hiring and capital spending plans.”

The latest index is based on the results of telephone interviews with a total of more than 600 business owners from all 50 states. The overall score is based on the answers to 12 question about present conditions and expectations for the coming year. Readings above 0 indicate more optimistic than pessimistic responses.

For the third quarter, the score for the present situation rose five points to 29, while the score for expectations slipped a point to 39.

A total of 68 percent of business owners rated the financial situations of their companies as somewhat or very good, up a point from the second quarter. A total of 72 percent of owners said they expect the financial situations of their companies to be somewhat or very good a year from now, also up a point.

A total of 41 percent of owners said company revenues had increased a little or a lot over the last year, up a point. Meanwhile,
48 percent of owners forecast increasing revenues for the year ahead, down three points. A total of  68 percent of owners rated their company cash flows as very or somewhat good, up five points. A total of 36 percent of owner said it had been somewhat or very easy to obtain credit over the past year — the highest reading since the fourth quarter of 2008.

While 18 percent of owners reported increased staffing over the past year, 14 percent reported decreases and 68 percent said staffing held steady. Looking ahead to the next year, 21 percent of owners forecast increased hiring, 8 percent predicted layoffs and 71 percent anticipated no change.

While 21 percent of owners said allocations for capital outlays had increased over the past year, 27 percent said capital spending decreased and 52 percent reported no change. While 25 percent of owners said they expect capital spending to increase over the next year, 22 percent predicted decreases and 53 percent said they anticipate no change.

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