Small business survey reflects more upbeat expectations

The latest results of a quarterly survey of small business owners reflect improving expectations for cash flow, revenues and capital spending.

Assessments of both present conditions and future expectations were more upbeat in the Wells Fargo and Gallup Small Business Index for the fourth quarter.

“The improvement in optimism among small business owners appears to be more than statistical noise,” said Scott Anderson, a senior economist with Wells Fargo. “Better economic conditions — including a strong lift in third-quarter GDP, in particular new strength in consumer spending — are boosting small business owners’ perceptions for increased cash flows and revenues over the next 12 months. This improved optimism bodes well for the overall economy.”

The latest overall index score rose from a negative 28 in the third quarter to a negative 4 for the fourth quarter. Compared to last year at this time, the index is 11 points higher. Since its inception in 2003, the overall index score has ranged from a high of 114 in the fourth quarter of 2006 to a low of a negative 28 in the third quarter of 2010.

The present situation score for the fourth quarter rose seven points, although it remains at a negative 19. The future expectations score jumped 17 points to 15, the highest reading since the third quarter of 2008.

The index reflects assessments of present conditions and future expections for six key measures: financial situation, cash flow, revenues, capital allocation spending, job hiring and credit availability.
The index is based on the results of telephone interviews conducted Nov. 4 to 10 with more than 600 small business owners across the United States.

Fully 50 percent of owners responding to the survey expect cash flow for their operations to be “very good” or “somewhat good” over the next year. Meanwhile, 44 percent of owners expect revenues to increase a lot or a little over the next year. Nearly 30 percent of owners reported increased revenues over the past year. While 24 percent of owners anticipate increasing allocations for capital spending over the next year, 18 percent expect staffing levels to increase.