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Small Business Owners More Optimistic

May 12, 2010

thumbs upTwo new surveys have found that small business owners are feeling slightly more optimistic, even though sales and hiring remain weak.

The National Federation of Independent Business survey indicated that the small-business optimism index rose from 86.8 in March to 90.6 in April, the highest level since September 2008. The study was based on responses from 2,716 small businesses, most with fewer than 10 employees, and nearly half in retail or construction.

But William Dunkelberg, chief economist for the group, acknowledged that the full picture is still grim. "There is nothing magical about entering the 90s, other than in comparison to the 1980-82 period when only one quarterly reading fell below 90," he was quoted as saying by MarketWatch. "These gains are not enough to establish that a solid recovery is underway."

Dunkelberg explained that small businesses are reluctant to hire new staff because demand for goods and services is still lagging. "If you don't have any sales," he told The Wall Street Journal, "you don't need to hire anybody."

A recent Wells Fargo/Gallup Small Business Index survey also showed increased optimism among small business owners, driven by more favorable perceptions of their current financial situation and cash flow. The index score was still low at negative 11, although it rose five points from January and 10 points from July 2009. A score of zero indicates that small business owners are neither optimistic nor pessimistic about their companies' situations.

"As consumer and business spending appeared to pick up pace, this bolstered small business owners' optimism around their current situation," explained Dr. Scott Anderson, Wells Fargo senior economist, in a press release. "In our latest survey, we see more small business owners describing their cash flows and current financial situation as good and higher percentages seeing an increase in revenues over the last 12 months. However, business owners remain skeptical about the sustainability of this current upturn."


Compiled by Yaffa Klugerman

Sources:

"At Small Businesses, Hiring Still Drags," The Wall Street Journal, May 10, 2010, Sarah E. Needleman

"Survey Finds Small Businesses Slightly More Optimistic," MarketWatch, May 11, 2010, Rex Nutting

"Wells Fargo Survey: Small Business Owner Optimism Improves; Current Financial Situation Getting Stronger," BusinessWire, May 11, 2010

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