A quarterly index tracking how small business owners assess their financial situations has declined even as concerns about revenues and cash flow mount.
Wells Fargo and Gallup announced that their Small Business Index fell six points to 17 for the third quarter, erasing gains from earlier this year.
A reading above 0 still indicates business owners responding to the survey are, as a group, more optimistic than pessimistic. The index remains 45 points higher than its recession low for the third quarter of 2010.
The latest index reading reflects the results of a telephone survey conducted in July with more than 600 small business owners across the United States.
“Business owners have a lot of unknowns in front of them today,” said Doug Case, small business segment manager for Wells Fargo. “This is the first drop in the index this year, and it seems to correlate to the lower percentage of business owners planning to invest in their companies in the year ahead. In the survey, businesses said they’ll be more likely to invest in their businesses when they see improvements in their operating environment and better sales and revenues.”
The proportion of owners responding to the latest survey who said revenues increased over the past year fell five points to 31 percent.
The share of owners who said they expect their businesses to be in somewhat or very good financial positions over the next year fell seven points to 59 percent. Meanwhile, 20 percent of owners said they anticipate that their operations will be in somewhat or very poor financial situations, up five points.
The share of owners who expect cash flow to be somewhat or very good fell five points to 51 percent. At the same time,
43 percent of owners anticipate increasing revenues over the next year, down six points. And 37 percent of owners believe credit will be somewhat or very difficult to obtain, up five points.
Fully 53 percent of small business owners responding to the survey reported capital investments over the past year, with 70 percent purchasing new equipment or machinery, including tablet computers and smartphones.
But only 41 percent of owners said they plan to make capital investments in the coming year. Those who said they don’t plan to make investments most frequently cited concerns about the economy.
Among those who said they expect to make capital investments, most plan to fund their spending through business revenues and profits rather than relying on credit or savings.