Small biz optimism remains stagnant

Small-business owners’ optimism remains fixed at zero, which is neither optimistic nor pessimistic, as confidence regarding today’s financial climate couldn’t counterbalance worse expectations for future revenues and capital spending allocation, according to Wells Fargo & Co.’s third-quarter results from its Wells Fargo/Gallup Small Business Index.

“Business owners are demonstrating a reluctance to invest in their businesses and are holding onto cash,” says Doug Case, Wells Fargo small business segment manager. “In recent months, we’ve seen strong growth in deposit balances as business owners prepare for potential business challenges and save for future opportunities.”

The third-quarter results indicates some improvements in sentiment concerning small-business owners’ financial situation, cash flows, hiring and credit availability over the last 12 months, leading to negative 10, a four-point improvement in the survey’s “present situation” from negative 14. This survey metric has been a negative figure since the first quarter of 2009.

However, significant declines in expectations for revenues and capital spending over the next 12 months are also reported. All six measures of the Index, which include financial situation, cash flow, revenues, capital spending allocation, hiring and credit availability, reveal declines in the Index’s future expectations component, falling four points to 10 this quarter.

“Sales and demand clearly remain challenged,” says Dr. Scott Anderson, a Wells Fargo senior economist. “Rising inflation and gasoline prices combined with renewed weakness in U.S. job creation has undermined consumer confidence and their ability to spend.”

For the present financial situation, 53 percent rate it as somewhat or very good, a jump from 47 percent in the second quarter of 2011, while 28 percent rate it as somewhat or very poor, a decline from 33 percent in the second quarter of 2011. Forty-two percent rate their present cash flows as somewhat or very good, which is up from 38 percent, and 34 percent rate their present cash flows as very or somewhat poor, a decrease from 38 percent.

Regarding hiring, 14 percent rate that the amount of jobs or positions at their employers grew by a lot or a little, an increase from 10 percent in the second quarter of 2011. Thirty-four percent rate their credit availability as somewhat or very difficult to obtain, which is up from 30 percent in the second quarter 2011.

In the next 12 months, 42 percent expect employer revenues to grow by a little or a lot, a decline from 49 percent in the second quarter of 2011 while 21 percent believe the money allocated toward capital spending to increase a little or a lot, a decrease from 26 percent in the second quarter 2011.

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