- Optimism still well below pre-pandemic levels
- Current situation a concern, while future looks brighter
- Recovery expected to last into fall 2021 or later
WASHINGTON, D.C. -- The fourth-quarter Wells Fargo/Gallup Small Business Survey finds that small-business owners continue to face significant financial challenges as a result of the global pandemic. While up slightly from a score of 60 in the third quarter, the current Small Business Index score of 72 remains dramatically lower than the pre-pandemic high of 142 a year ago.
The Wells Fargo/Gallup Small Business Index is a summary indicator of small-business owners' present and future optimism on six key financial dimensions related to their enterprise: their overall financial situation, revenue, cash flow, capital spending, hiring and access to credit.
The fourth-quarter results, based on interviews conducted online Nov. 6-13, continue to reflect a pattern by which owners' forecast for the future is more positive than their ratings of the present. The current conditions component of the index has edged up from July but is still well below where it was in April, signifying continued concern on the part of small-business owners about what they are seeing day to day.
At the same time, small-business owners are significantly more optimistic about their future situation than they were in April, and modestly more optimistic than in July. This optimism reflects small-business owners' opinions that their business situation will improve on all six key components of the index.
Line graph. The Wells Fargo/Gallup Small Business Index Since Q2 2019. Currently, index stands at 72 overall, including 48 for future expectations and 24 for assessments of the present situation.
Zeroing in on small-business owners' views of their financial situation (one dimension of the index), nearly seven in 10 owners are positive about their current financial situation, and about as many are positive about what their financial situation will be 12 months from now. Both ratings have improved since April but remain below where they were pre-pandemic.
Line graph. U.S. Small Business Owners' perceptions of current and future financial situations. 69% say their current financial situations are good or very good, while 73% say their future financial situations are good or very good.
Responses to other questions that are part of the index are more negative. Some 46% of owners say their revenues have decreased over the past 12 months, compared with 30% who say they have increased. And just 13% say the number of jobs at their company has increased over the past 12 months, down from as high as 27% who said jobs were increasing last fall.
The Economy and Impact of COVID-19 on Business Operations
Beyond updating the index, the latest Wells Fargo/Gallup Small Business Survey focused on owners' perceptions of the state of the U.S. economy. Owners' positive views of the current state of the economy plunged as the pandemic began, and remain low in this latest update, with just 32% saying the national economy is either "excellent" or "good." At the same time, the trend indicates that small-business owners are beginning to feel more confident in the direction of the economy than they did at the start of the pandemic. The percentage saying the U.S. economy is growing is at 29%, up from 6% in April, and fewer now say the economy is in either a depression or recession.
Line graph. U.S. Small Business Owners' perceptions of the current state of the economy. 33% say the economy is in a recession, while the same percentage say the economy is slowing down. 29% say the economy is growing and 5% report it is in a depression.
Length of Recovery
While small-business owners are more optimistic about their current and future financial situations and the economy, they do not see a financial recovery for the overall U.S. economy or their own business to happen until well into 2021 and beyond. It is important to note that this survey took place Nov. 6-13 -- and during this time, positive vaccine news was announced.
Custom graph. 34% of small-business owners believe it will be "beyond 2021" when the U.S. economy recovers from the pandemic. Another 28% believe it will be the second half of 2021, while 23% believe the economy will recover in the first half of 2021.
Custom graphic. 29% of small-business owners believe that it will take "beyond 2021" for businesses like theirs to recover from the pandemic. Another 26% believe small businesses will recover in the second half of 2021, while 26% believe it will happen in the first half of 2021.
Challenges Affecting Small-Business Owners
The pandemic continues to be far and away the top challenge facing small businesses, dwarfing all other issues mentioned by owners, at 29%. This top-of-mind recognition of the impact of the pandemic has been consistent since the start of the spring, although mentions of COVID-19 are down from April (44%).
Conducted just days after the U.S. presidential election, the survey shows that 41% of small-business owners said the election results made them more optimistic about their business going into 2021 -- while an equal percentage, 40%, said the election results made them less optimistic. Nineteen percent of owners said the election results caused "no change" in their optimism going into 2021.
The COVID-19 pandemic continues to negatively affect small-business owners in the U.S. But owners have, for the second straight quarter, become more positive about key business metrics such as their future financial situation, revenue, cash flow, capital spending, hiring and credit. However, small-business owners expect to be in a difficult place for the foreseeable future, with full economic recovery some ways off.
A major political shift is coming with the change in presidential administrations in January -- but in early November, owners were divided on whether the election results made them more or less optimistic about their business' future.
For more information about Wells Fargo Works for Small Business, visit https://wellsfargoworks.com/. Follow us on Twitter @WellsFargoWorks.
Learn more about how the Wells Fargo/Gallup Small Business Index works.