Wells Fargo finds small business optimism waning

Wells Fargo, which Nov. 9 relocated its Greenwich Wells Fargo Private Bank to bigger offices at 1 Lafayette Place in Greenwich, recently issued a national small-business survey that found a seven-year high in optimism among small business owners in January was evaporating and today they are feeling less optimistic than a year ago.

The uptick in pessimism was countered by data reflecting 65 percent of small business owners doing well or unchanged from a year ago financially.

In the quarterly small-business survey, which measures small business owner optimism, the overall index score dipped from 59 in August to 54 in November, representing the lowest score since July 2014.

“It”™s also the third quarter in a row that the score has dropped after starting the year at 71,” the bank reported.

In a prepared statement, Wells Fargo said a “major contributor to this year”™s decline” was a drop in the number of owners reporting increases in company revenue. The score also was driven by a combination of what Wells Fargo termed “incremental declines in business owner perceptions of their financial situation, capital spending and hiring.”

“This has been an unusually slow economic recovery for everyone, and small business owners are certainly feeling that,” said Mark Vitner, managing director and senior economist for Wells Fargo Securities. “With the economy growing as slowly as it has been, it”™s been difficult for many business owners to increase their sales, and this has been particularly burdensome for firms that have seen expenses rise, including healthcare costs. As a result, many have been reluctant to invest in equipment, expand their operations and hire staff, even as business owners in general have seen gradual improvement in their financial situation and cash flow over the last few years.”

Company revenue changed significantly since January, the bank said, noting: “Looking ahead, 47 percent of business owners expect their revenues to increase in the next 12 months compared with 55 percent at the start of the year.”

Most other Index measures had small declines or saw no improvements in the fourth-quarter survey including:

• When asked about their financial situation, 65 percent of small-business owners rated it as very or somewhat good, essentially unchanged from a year ago (64 percent) and the same score as the previous three quarters.
• Twenty-six percent of small business owners said their company increased the amount of money allocated for capital spending in the past year, essentially unchanged from 27 percent a year ago.
• Seventeen percent of business owners increased the number of jobs at their company in the last 12 months, about the same metric as a year ago (18 percent). When asked about hiring plans in the next 12 months, 26 percent said they plan to increase jobs, unchanged from a year ago.

In the survey, business owners were also asked about their use of credit. Thirty-eight percent said they had less debt in November than a year ago. And more business owners reported being comfortable with the amount of business debt they currently carry (40 percent), up from 29 percent in April 2013. Ten percent of business owners expressed difficulty paying down their current business debt, compared with 18 percent in April 2013 and 20 percent in April 2012.

Thirteen percent of owners told Wells Fargo their biggest concern was government regulations, the highest percentage since the question was first asked in 2Q 2013. The No. 2 issue was attracting customers and finding new business (11 percent) and hiring and retaining quality staff (10 percent). “These three challenges have been consistently reported as the top concerns of small business owners since early 2013,” Wells Fargo reported.