Wells Fargo Reports in a Survey That Optimism in Small Businesses Has Declined

(Source: Wells Fargo) -- The Wells Fargo/Gallup Small Business Index declined six points to positive 17 in a survey conducted July 9 – July 13, 2012. This decline virtually erases gains experienced earlier this year and brings to light the lingering concerns business owners have about their future financial situation, revenue, and cash flow.
The number of business owners expecting to be in a good financial position over the next 12 months declined seven percentage points to 59 percent; those expecting increased revenues in the next 12 months declined by six percentage points to 43. Despite the decline in the Index score this quarter, business owner optimism has improved significantly from the Recession low point when the Index dipped to minus 28 (-28) in Q3 2010.
This quarter’s survey also included questions to gauge business owner attitudes about capital spending. Fifty-three percent of business owners say they have made capital investments over the past 12 months, with the majority (70 percent) purchasing new equipment or machinery. A smaller percentage of business owners – 41 percent – say they plan to make capital investments in the next 12 months. The number one reason cited for not making an investment was concern about the overall state of the economy.
“Business owners have a lot of unknowns in front of them today,” said Doug Case, Wells Fargo small business segment manager. “This is the first drop in the Index this year and it seems to correlate to the lower percentage of business owners planning to invest in their companies in the year ahead. In the survey, businesses said they’ll be more likely to invest in their businesses when they see improvements in their operating environment, and better sales and revenues.”
Future Capital Spending
Small business owners planning to make capital investments over the next 12 months say they intend to make them in new equipment/machinery (64 percent) and technology, such as computers (61 percent), new software or websites (56 percent), and mobile devices (52 percent). This reflects the growing importance of having up-to-date technology to conduct business.

Purchase rates for newer technology devices have steadily increased year-over-year among small business owners, while investments in older technologies are flat or declining:

Smartphone: 38 percent, up 11 percentage points from 27 percent in Q2 2011
iPad® or other tablet: 23 percent, up 12 percentage points from 11 percent in Q2 2011
Cell phone that is not a Smartphone: 30 percent, down 4 percentage points from 34 percent in Q2 2011
Desktop computers: 29 percent, down 3 percentage points from 33 percent in Q2 2011

Funding Capital Investments
Lower expectations for increased revenues in the next 12 months may be problematic for small business owners who plan to fund capital expenditures primarily with business revenue and profits rather than relying on credit or savings. Business owners who said they plan to make a capital investment over the next 12 months say they are planning to pay for it using:

Business revenue/profits (93 percent)
Credit (39 percent)
Savings (31 percent)
Some other way (16 percent)
Outside investors (14 percent)

Small Business Index Key Drivers
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.

Source: Wells Fargo

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Alex Ferreras
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  • Giovanni Caputo

    Wells Fargo says? Who would want to listen to Wells Fargo their goal is to shove their products down your throat. What self respecting small business would go to a Wells Fargo branch to get ripped off? No way there’s better deals out there, so Wells Fargo small business didn’t decline, you are in decline!

  • E

    Wells Fargo can blame themselves and the other bailed-out, mismanaged, banks that should have been allowed to default for the lack of optimism from small business owners.
    Corporate America (including Big US Banks) are sucking the life out of American small businesses.Corporate America believes in Capitalism when it means pushing for lack of regulations in order to “let business grow & regulate itself” but become quite the Socialists when it comes to it’s never-ending appetite for CORPORATE WELFARE.
    It’s no surprise with all of the corporate lobbyists funneling millions to their favorite political/corporate puppets(a total free-for-all with the passing of the right-wing backed Citizens United ruling)that the landscape has been leveled for Corporate business NOT Small Business Owners.
    So yes, Wells Fargo – Small Business owners are not as optimistic as they once were & the FACT that Wells Fargo & the other bailed-out failures that call themselves banks are NOT lending to Small business owners as implied BEFORE they got their Bailout AKA welfare check -this is killing many small businesses while banks continue to add to their assets by gobbling up the remains of many a small business. Corporate America has been allowed to create it’s own hybrid of Capitalistic and Socialistic beliefs- To break it down for you, they (Corporate CEOs, Banks, US Politicians, & lobbyists) expect you the American tax payer to SHARE in the RISK when their inability to run a solid business and produce a profit (even with all of the BILLIONS in subsidies they receive from us)causes their Business to implode. They want ALL OF US to share in that part of THEIR business. Now on the OTHER HAND, when they are on top of the world reaping in Billions in record profits each quarter, snorting cocaine off of the backsides of call-girls THOSE profits are THEIRS to squander however they choose and YOU the American Public are just pathetic pawns in their “Capitalist” system.