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

Revenues

Despite improvements in consumer spending over the past few months, 44 percent of business owners said their revenues have decreased a little or a lot in the past 12 months, up from 38 percent in July. Looking ahead 12 months, 29 percent of business owners expect lower revenues, up 11 points from the prior reading and the highest percentage of small businesses expecting decreasing revenues since Q2 2009.

Capital Spending

One in three (34 percent) small business owners expects to decrease their capital spending in the next 12 months. This is up from 24 percent in July and the highest number of owners expecting to lower their future capital spending since the third quarter of 2010. A larger percentage of business owners (40 percent) reported decreased capital spending over the past 12 months.

Financial Situation & Cash Flow

The number of business owners expecting to be in a “poor” financial position over the next 12 months increased to 28 percent in November while the percentage expecting “poor” cash flow increased to 30 percent – both at their highest level since the Index began in 2003.

Small Business Index Key Drivers

Statistically significant changes were seen in five of the six survey components – Jobs, Revenues, Capital Spending, Financial Situation, and Cash flow. Ease of Obtaining Credit did not have statistically meaningful changes this quarter.

Present Situation (past 12 months)

• Jobs – 26 percent reported the number of jobs at their company decreased a little or a lot, up from 21 percent in Q3 2012
• Revenues – 44 percent said revenues decreased a little or a lot, up from 38 percent in Q3 2012
• Capital spending – 18 percent said their capital spending increased a little or a lot, down from 23 percent in Q3 2012; 40 percent indicated their capital spending decreased a little or a lot, up from 34 percent in Q3 2012

Future Expectations (next 12 months)

• Jobs –21 percent expect the number of jobs at their company to decrease a little or a lot, up from 10 percent from Q3 2012
• Revenues – 37 percent expect revenues to increase a lot or a little, down from 43 percent in Q3 2012; 29 percent expect revenues to decrease a lot or a little, up from 18 percent in Q3 2012
• Capital spending – 34 percent expect the amount their capital spending to decrease by a little or a lot, up from 24 percent in Q3 2012
• Financial situation – 50 percent expect their company’s financial situation to be very good or somewhat good, down from 59 percent in Q3 2012; 28 percent expect their company’s financial situation to be poor or very poor, up from 20 percent in Q3 2012
• Cash flow – 44 percent expect their cash flow to be very or somewhat good, down from 51 percent in Q3 2012; 30 percent expect their cash flow to be somewhat poor or very poor, up from 23 percent in Q3 2012

A downloadable report is available on the Small Business Index section of Wells Fargo’s Business Insight Resource Center.

About the Small Business Index

Since August 2003, the Wells Fargo/Gallup Small Business Index has surveyed small business owners on current and future perceptions of their business financial situation. The Index consists of two dimensions: 1) Owners’ ratings of the current situation of their businesses and, 2) Owners’ ratings of how they expect their businesses to perform over the next 12 months. Results are based on telephone interviews with 607 small business owners in all 50 United States conducted Nov. 12-16, 2012. The overall Small Business Index is computed using a formula that scores and sums the answers to 12 questions — six about the present situation and six about the future. An Index score of zero indicates that small business owners, as a group, are neutral -- neither optimistic nor pessimistic -- about their companies’ situations. The overall Index can range from -400 (the most negative score possible) to +400 (the most positive score possible), but in practice spans a much more limited range. The margin of sampling error is +/- four percentage points.

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