A Wells Fargo/Gallup survey showed small business optimism dipped in the second quarter.
Some small businesses are suffering from lower revenues, a concern that has left owners less confident about the small business climate in the second quarter.
Small business optimism in a Wells Fargo/Gallup quarterly survey fell to 64 in April, down from 71 in January—the biggest decrease since November 2012. This score, however, is higher than second-quarter optimism in 2014, which was 47, as well as in 2013, when it was a measly 16.
Wells Fargo and Gallup survey small business owners on present circumstances and future expectations in six areas: financial situation, cash flow, revenue, capital spending allocation, hiring and credit availability.
Forty-two percent of small business owners reported that company revenues increased over the past 12 months, down from 49 percent in January. Businesses reporting higher revenue are still up from this time a year ago, however, when 36 percent reported an increase.
A slight drop in credit expectations contributed to the decline in optimism as well. Twenty-five percent said credit was very or somewhat difficult to obtain in April, up from 20 percent in January.
“The latest index scores show that while small business owners are in a better place now than a year ago, some still face challenges in this economic environment,” said Lisa Stevens, Wells Fargo head of small business. “A decline in revenues can influence business owner perceptions of current conditions and temper their optimism for the year ahead. Despite the pullback in optimism this quarter, there’s more certainty in today’s economy than at this time last year, and we’re seeing more promising trends.”
Although optimism dipped slightly in this report, there are positive signs: This was the highest cash flow reported in seven years. Fifty-eight percent of owners say their company’s cash flow was very or somewhat good over the past 12 months, up from 54 percent in January and 50 percent a year ago. The percentage of owners reporting good current cash flow is the highest since the first quarter of 2008.
NFIB’s Small Business Optimism Survey, which is released the second Tuesday of every month, rose 1.7 points in April. The slight increase in small business confidence is a decent month-over-month reading, but still below historical average. After a jump in January, optimism fell 2.8 points in March due to a stalling economy and bad weather.
“Regardless of how we measure the economy, there’s just not a lot of movement one way or the other in terms of small business optimism,” says NFIB spokesman Jack Mozloom. “We had a big increase in January and we were hoping to see the start of an upward trend, but that never materialized,” Mozloom says. “Small business is basically in a holding pattern.”
