Optimism in small business sector


ChartThe contrary nature of economic sentiment measurement is demonstrated yet again – although we’re starting to see creeping pessimism among consumers, small businesses are said to be optimistic about their 2014 prospects. However, small business optimism is not robust.

The survey, Capital One’s Spark Small Business Barometer, reveals that respondents have better feeling about the times ahead than they do about current conditions. 47% say Q3 2013 conditions at the moment are good or excellent, against 52% who say they are fair or poor. But 46% expect improvement in their own company’s results over the next six months, up from only 37% in Q3 2012.

If the previous paragraph depicted a silver lining, here’s a black cloud: Despite the increasing optimism, few are making concrete plans to take advantage of improving conditions.

“Our third quarter Barometer results show a bit of a paradox. While a growing number of small businesses are expressing optimism about the year ahead for the national economy, and their business financials are showing improvement, a high percentage still have no near-term plans for growth,” said Jon Witter, President of Direct, Consumer and Small Business Banking at Capital One. “The lack of planning for and investing in the future – whether related to hiring, retirement or emergency planning – is concerning and a sign of the continued constraints and headwinds that small businesses face every day.”

Interestingly, minority-owned businesses are on the cutting edge of the optimistic side of the coin – 64% are reporting favorable business conditions, as opposed to the 47% previously cited.

Leading challenges that small business owners worry about are diffuse, with 29% citing the overall economy as the main concern, followed by healthcare costs (19%) and government regulation (15%). Most would like to see tax cuts at both the state and local level.

Confidence in the overall economy is much improved compared to Q3 2012, with a majority now expecting positive growth. The number expressing optimism has increased from 44% to 52%.