Originally published on newsroom.wf.com.
Business owners showed a rise in optimism in the latest quarterly Wells Fargo/Gallup Small Business Index, conducted July 8–12. The overall optimism score rose seven points to 136, as owners in the third quarter continued to report strong revenues. A majority also expressed little concern that their businesses would be affected by U.S. trade and tariff policies.
Business owners continued to indicate strong optimism about their present and future financial situations, with optimism scores of 64 and 72 respectively. Confidence in revenue rose from last quarter, as 58% of respondents reported increases in the past 12 months and 64% said they expect increases in the coming year, representing a 6 percentage point increase for both metrics. When asked how they would rate the current state of the U.S. economy, 70% said either “good” or “excellent,” an increase of 7 percentage points from the second quarter of 2019. Meanwhile, the number of business owners who said the economy is on the right track for them to grow their business in the coming 12 months increased by 10 points to 61%.
Interest in obtaining credit
Owner interest in credit stood out in the Q3 survey, as one third (33%) of business owners said they are planning to apply for new credit products (such as a business credit card, line of credit or loan) in the next 12 months, which marks a 7 percentage point increase from Q2. In addition, only 3% of business owners cited credit availability as a top challenge. The quarter saw slight dips from the previous quarter in reported ease of obtaining credit in the past 12 months and expectations for the next 12 months (5 and 2 percentage point decreases respectively).
“Aside from providing a snapshot of the landscape for business owners, the Small Business Index gives us a chance to see how these owners are responding to the economy and how they need to be supported moving forward,” said Casey Dorsey, Wells Fargo Small Business Segment and Strategy Leader. “Gaining insights into business owners’ key challenges, their interest in financial tools like credit, and their expectations for growth provide a glimpse of their business or market — and also the economy as a whole.”
Trade and tariffs
The third quarter survey specifically looked into how owners viewed the impact on their businesses of recent trade and tariff policy changes. When asked how much they think the current trade and tariff situation will directly affect their business, two thirds (66%) said very little or not at all. When asked how the current situation would affect various business decisions, 76% said their hiring plans would not change even if the cost of goods increases. Similarly, 69% said they would not change their expansion plans even if the policies result in an increased cost of goods. The survey also asked how closely owners followed news about trade and tariff policies; 82% said they were following it somewhat or very closely.
“While news and changes in trade and tariff policies traditionally affect larger companies more heavily, it is notable that small business owners continue to make improvements in the current climate,” said Mark Vitner, senior economist at Wells Fargo. “While there are certainly concerns of the effects of current interaction with the global economy, this data indicates a continued level of resilience in the U.S. economy and specifically among small business owners.”
Attracting new business remains top challenge
For the second consecutive quarter, business owners highlighted attracting customers and new business as their top challenge, with 16% putting it at the top of the list. Although a majority of owners indicated little concern about the impact of trade and tariff policies, the availability of products and the ability to improve them was the second highest-ranked challenge, at 10%. Other top challenges included competition from larger companies and online retailers (10%), hiring and retaining qualified staff (9%) and the challenge of being one’s own boss (8%).
As was announced last quarter, the Wells Fargo/Gallup Small Business Index has recently shifted its methodology from the previous phone-based surveying to a web-based model. As the landscape of small business ownership and operation has shifted, specifically with the rise of digital/online facets, this change was made to reflect the reality of how businesses and their owners operate and to mitigate any biases in the types of businesses owners responding, as well as the responses themselves.
“Having surveyed the small business landscape for more than 15 years, the Small Business Index provides valuable insight into current and future perceptions of business owners,” said Doug Case, Small Business Segment Strategy and Design, Wells Fargo. “These recent updates reflect our interest in ensuring that the index accurately represents small business owner sentiment and providing the business communities with relevant information and resources.”
Wells Fargo/Gallup Small Business Index Scores: Q3 2018 – Q3 2019
Q3 2019 (surveyed July 2019)*
Q2 2019 (surveyed April 2019)*
Q1 2019 (surveyed January 2019)
Q4 2018 (surveyed November 2018)
Q3 2018 (surveyed July 2018)
*Using updated web-based surveying methodology. Results from the web mode are not directly comparable to the prior phone survey.
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