Resilient Small Business Optimism

The takeaway on small business optimism in the latest Wells Fargo/Gallup Small Business Index survey (taken between January 9-15 and released on February 7) is a bit tricky, but the bottom line remains that American entrepreneurs are resiliently optimistic.

The overall score index came in at 106, which was down notably from the all-time high of 129 registered in the previous quarterly survey. However, the 106 index score still indicates a strong level of small business optimism.

Consider how the index score should be read, according to Wells Fargo/Gallup: “The overall Index can range from -400 (the most negative score possible) to +400 (the most positive score possible), but in practice spans a much more limited range. The margin of sampling error is +/- four percentage points. The highest Index reading was +129 in the fourth quarter of 2018, and the lowest reading was -28 in the third quarter of 2010.” So, 106 is very strong.

When we look at key questions and the percentages for each response, we can see that optimism remains high. For example, on rating “your company’s financial situation today,” 75 percent said very good or somewhat good, while only 13 percent said “neither good nor poor” and a mere 10 percent poor or very poor.

And on rating “your company’s financial situation … 12 months from now,” 81 percent said very good or somewhat good, while 11 percent said “neither good nor poor” and a meager 6 percent poor or very poor.

Indeed, the entire survey points to small business owners remaining an optimistic bunch – just not as optimistic as was the case in the previous survey.

This more or less lines up with the findings in, for example, the latest NFIB Small Business Optimism Index, in which it was noted:

“The NFIB Small Business Optimism Index slipped 3.2 points in January, as owners continued hiring and investing, but expressed rising concern about future economic growth. The 101.2 reading, the lowest since the weeks leading up to the 2016 elections, remains well above the historical average of 98, but indicates uncertainty among small business owners due to the 35-day government shutdown and financial market instability.”

Similarly, Andy Rowe, Wells Fargo head of Customer Segments, observed, “Today’s business owners are very in tune with changes in the economy, government policy and many other factors that can affect their ventures. They are seeing these factors come into play and are predictably exercising measured caution as they plan for the coming year.”

Indeed, much has occurred over the last two months to raise questions on the political and policy fronts. And when things do go awry, it’s usually government doing something ill-advised. Small business owners know that better than most. At the same time, as noted earlier, the resilient optimism of the American small business owners seems to be the main takeaway from these recent measures of optimism.


from – – by Raymond J. Keating

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