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Wednesday, July 28, 2010

Small Business Outlook Down

Could the small business outlook for the future actually have grown more negative in recent months? Well, according to the latest Wells Fargo/Gallup Small Business Index, the answer, unfortunately, is yes.

The latest index reading, released on July 27, was down by 17 points versus April to the lowest level since the survey’s inception. It has covered 29 quarters now.

As explained by the index release:

The Index is the sum of “present situation” and “future expectations” of small business owners for six key measures, including financial situation, cash flow, revenues, capital allocation spending, job hiring and credit availability. The “present situation” score declined four points to negative 26 while the “future expectations” component declined 13 points in July to (-2) - the first negative “future” score in the history of the index.

The -28 points for July is down from the index peak of 114 hit in 2006.

Answers to two key questions on future expectations are important to note:

Capital Spending – 37 percent expect their companies’ allocation for capital spending to decrease a lot or a little over the next 12 months, up from 29 percent in Q2 2010.

Hiring – 13 percent expect the overall number of jobs at their companies to increase, down from 18 percent in Q2 2010 (lowest point in survey history).

Doug Case, small-business segment manager for Wells Fargo, said, "Small-business owners are usually a very optimistic bunch. But this July we’re seeing a real change in future expectations."

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

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