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Small-Business Owner Optimism Rises in Third Quarter

Small-Business Owner Optimism Rises in Third Quarter

by Frank Newport and Coleen McMurray

Story Highlights

  • Small-business owners evince strong financial outlook
  • Improvement in Small Business Index driven by strong revenues
  • Impact of trade and tariffs mixed -- many cite no impact

WASHINGTON, D.C. -- Small-business owners' optimism has edged up over the past three months. In the latest quarterly Wells Fargo/Gallup Small Business Index survey, conducted July 8-12, 2019, the overall index is +136, up from the +129 recorded in Quarter 2. The index is a measure of owners' present and future optimism -- both of which saw upticks this quarter.

Bar graph. Wells Fargo/Gallup Small Business Index for April, July 2019. Index is at 136 for July, up 7 points from April.

The Small Business Index measures small-business owners' attitudes about a wide variety of factors affecting their businesses. One of the more important shifts measured this quarter concerns revenues: 58% of owners say their revenues increased in the past 12 months, up six percentage points from Quarter 2, and 64% now say they expect revenues to increase in the future, also up six points over last quarter.

More broadly, small-business owners' optimism about their financial outlook over the next year has also improved, with 79% now saying they are more optimistic than pessimistic -- up from 70% in Quarter 2.

Small-Business Owners More Optimistic Than Pessimistic
In general, would you describe your financial outlook for your business over the next 12 months as more optimistic than pessimistic or more pessimistic than optimistic?
April 2019 July 2019
% %
More optimistic than pessimistic 70 79
More pessimistic than optimistic 30 21
Wells Fargo/Gallup

Small-business owners' optimism appears to reflect in part a generally positive view of the national economy. Seventy percent of owners now think the U.S. economy is excellent or good, compared with 63% in Quarter 2. Only three in 10 feel the economy is currently fair or poor.

Small-Business Owners' Views of the State of the U.S. Economy
How would you rate the current state of the national economy?
April 2019 July 2019
% %
Excellent 15 20
Good 48 50
Fair 31 25
Poor 6 5
Wells Fargo/Gallup

The survey also finds an uptick in small-business owners' anticipated use of credit going forward, a potential sign of pending business expansion. One-third of owners say they are planning to apply for new credit products in the next 12 months -- up from 26% last quarter.

Impact of Trade and Tariffs

While over eight in 10 small-business owners have been following news about the trade and tariff situation very or somewhat closely, two-thirds indicate that the situation will have very little or no impact on their specific business. In part, this may reflect that relatively few owners (23%) report that their business has international customers.

Challenges Facing Small-Business Owners

Owners are most likely to cite attracting customers and new business as the top challenge facing their business (16%), a departure from many surveys over the past two years, in which hiring and retaining qualified staff was the top response. This quarter, the availability of products and the ability to improve them was the second-highest-ranked challenge (10%). Other noteworthy challenges cited by small-business owners include competition from larger companies and online retailers (10%), hiring and retaining staff (9%), and the challenge of being one's own boss (8%).

Bottom Line

Small-business owners remain upbeat about their companies' financial outlook and the overall national economy and appear to be planning on expansion by applying for new credit products in the coming year. Although the current U.S. trade and tariff situation is being debated on many levels, relatively few small-business owners say it is affecting their business directly. As for challenges, owners remain concerned about core business basics -- attracting customers, developing new products for their business and fending off competitors.

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Learn more about how the Wells Fargo/Gallup Small Business Index works.

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