Small Business Owners Less Optimistic About Economy

A few weeks ago we wrote there were some strong signs that the economy was finally turning around based on comments from some distributors and suppliers. A lot of people apparently don’t agree.

A new study shows that there is little optimism on the part of many of the nation’s small business owners. The survey by Discover’s Small Business Watch reveals that more than half of America’s small business owners see conditions for their businesses getting worse in the next six months.  Discover’s monthly check on the pulse of small business owners measured 75.7 in March, down 9.2 points from February and back to the levels of a year ago.

“We’ve seen bigger month-to-month drops, but there is clearly a pattern here: Small business owners don’t like what they’re seeing – both at home and in the larger economy – and they’re responding by pulling back, rather than just holding the line,” said Ryan Scully, director of Discover's business credit card who commissions the monthly survey. “Tax season could be having an effect on the overall mood, especially because they’re still not seeing any relief from the government.”

The March results were marked by a surge in the number of small business owners who say economic conditions for their own businesses are deteriorating: 53% of them say the climate will get worse in the next six months, compared to only 37% who answered that way in February. Of the remaining respondents, 20% said things are getting better, 20% said things are the same, and 6% are unsure.

When asked about their intentions to invest in their businesses, 52% said they would decrease spending, up from 43% in February, while 27% said they would make no changes, and 18% said they plan to increase spending.

Other March Confidence Indicators:

Little faith was expressed for the direction of the larger economy, as 58% said it is getting worse, up from 44% in February; while 22% think it is getting better, down from 31% the prior month; and 16% said it’s staying the same, versus 24% last month.

Views on the current economy were relatively unchanged over February: 59% rated the economy poor, 31% called it fair, 6% said good, and 1% chose excellent.

Cash flow issues remained largely unchanged: 46% said their businesses encountered temporary cash flow issues in the past 90 days that caused them to hold off on paying some bills, 47% did not have issues, and 7% weren’t sure.

Jack Keough is a contributing editor to Modern Distribution Management and the owner of Keough Business Communications. He can be reached at jack@mdm.com or by phone at 508-734-0029. Keough is the former editor of Industrial Distribution Magazine.