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Wells Fargo Small Business Index: Business Owners Turn Pessimistic In Post-Election Environment

Small business owners as a group are now the most pessimistic they have been since the third quarter of 2010, according to the latest Wells Fargo/Gallup Small Business Index. The Index fell 28 points to negative 11 (-11) in the post-election survey conducted Nov. 12-16, 2012. Key drivers of this decline include business owner concerns about their future financial situation, cash flow, capital spending, and hiring over the next 12 months.

“This is an eye-opening drop in optimism and shows the level of caution that exists among small business owners today,” said Marc Bernstein, head of Small Business for Wells Fargo. “Business owners who navigated through the Great Recession now face more uncharted territory created by ongoing uncertainty in Washington. These owners know that potential federal government spending cuts and tax changes can create a ripple effect, hitting the pocketbooks of consumers and reducing spending that could hit small businesses hard.”

Wells Fargo, together with Gallup, surveys small business owners quarterly across the nation to gauge their perceptions of their present situation (past 12 months) and future expectations (next 12 months) in six key areas: financial situation, cash flow, revenues, capital spending allocation, hiring, and credit availability.

The November decline in the Index was disproportionately impacted by a drop of 19 points in the Future Expectations score compared to a drop of 9 points in the Present Situation score.

Index Scores: Q4 2011 – Q4 2012
      Overall Index    

Present Situation
    Future Expectations
Q4 2012

(surveyed November 2012)
      -11     -10     -1
Q3 2012

(surveyed July 2012)
      17     -1     18
Q2 2012

(surveyed April 2012)
      23     -1     24
Q1 2012

(surveyed January 2012)
      15     -6     21
Q4 2011

(surveyed October 2011)
      -3     -11     8


Likely related to owners’ pessimism, one in five small business owners (21 percent) expects to decrease the number of jobs at their company over the next 12 months – the largest percentage of small businesses expecting to reduce jobs since the inception of the Wells Fargo/Gallup Small Business Index in 2003. One in four owners (26 percent) reported a reduction in the number of jobs at their company over the past 12 months, representing the largest percentage since the fourth quarter of 2010.

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