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Survey: Optimism remains high among small businesses

A jump in “future expectations,” as to the performance expectations for small businesses over the next 12 months, is largely driving that improvement in optimism.

The latest quarterly survey of small businesses conducted by Wells Fargo indicated a majority are feeling the most optimistic since early 2007, according to findings from the latest Wells Fargo/Gallup Small Business Index poll.

The company added that a jump in the “future expectations” score – which measures how business owners expect their businesses to perform over the next 12 months – is largely driving that improvement in optimism. In January that score improved five points to 65, the highest reading since December 2006, the last time the “future expectations” score finished at 65, noted Mark Vitner, managing director and senior economist at Wells Fargo

“The economy ended 2017 on a high note, and many small business owners believe that strong momentum will carry over into 2018,” he said in a statement.

“We are encouraged by the breadth of the improvement this past year, particularly in quantifiable areas like sales and overall finances,” Vitner noted. “The more broad-based the gains, the more likely those gains will be longer lasting.”

In January, 52% of business owners reported their revenue increased a little or a lot over the past 12 months, up from 46% in November 2017 and the highest reading on this measure since 2007.

The survey also showed that many business owners anticipate strong revenues in the year ahead, with 66% saying they expect their company revenues to increase over the next 12 months, Wells Fargo reported, which is the highest reading on this measure in the history of the survey.

Other key findings from the company’s first quarter poll include:

  • Healthy cash flow outlook– Three-fourths (77%) of business owners expect their cash flow will be very good or somewhat good over the next 12 months, up from 73% in November 2017 and the highest reading on this measure in the history of the survey.
  • Improvements in capital spending– Some 38% expect the amount of money their business allocates for capital spending to increase a little or a lot over the next 12 months, compared to 33% in November 2017. This is the highest this measure has been since December 2003, when it was also 38%.
  • Ease of obtaining credit– Some 46% expect credit will be very easy or somewhat easy to obtain, compared to 45% in November 2017.
  • Continued hiring– A third (33%) of small business owners expect the number of jobs at their company to increase in the next 12 months, up one percentage point from November 2017.

“Our latest survey tells us that small business owners feel better about the economy and the future of their businesses,” said Andy Rowe, head of customer segments at Wells Fargo.

“We are encouraged to see more business owners forecasting strong revenues, healthy cash flows, and increased capital spending over the next 12 months,” he added. “These trends tell us that small business owners are more positive about the economy, and that optimism is translating into investment in the future of their businesses right now.”

That being said, the Wells Fargo survey also discerned that a number of ongoing challenges continue to cloud the small business environment.

According to its January poll, attracting customers and finding new business rose to the top of the list at 16%, followed closely by hiring and retaining high quality staff at 13%.

Other top concerns this quarter included financial stability and cash flow (10%), taxes (10%), government regulations (7%) and competition/larger corporations/internet (7%).

Wells Fargo noted, however, that those challenges have been consistently reported as the top concerns of small business owners since early 2013, although the order of concerns shifts from quarter to quarter.

TAGS: News
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