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Small Business Owner Optimism Continues to Drop

September 11, 2008

Latest Wells Fargo/Gallup Survey: Confidence drops in July; lowest reported score in five years

[Wells Fargo Press Release San Francisco — September 9, 2008]  Reflecting signs of a weaker economy and rising costs, small business owners’ optimism continues to decline. According to the recent Wells Fargo/Gallup Small Business Index, surveyed in July, small business owner optimism has fallen to 45, the lowest score reported since the survey began five years ago. The Index has been declining since mid-2007.

“Although the Small Business Optimism Index hit a record low last month, the pace of decline has moderated,” said Dr. Scott Anderson, Wells Fargo senior economist. “This appears to be a direct reflection of economic conditions, which we expect to remain stagnant into the second half of 2009. Many economic and financial problems are weighing on the U.S. consumer, leading to decreased consumer spending, and this is having a negative impact on small business owners’ optimism. However, a steep contraction in economic activity may yet be avoided.”

The most recent results show a 3-point drop from April 2008, and a 38-point drop from January 2008. The Index has dropped a total of 69 points from its highest score of 114, recorded in December 2006. The Index is the sum of “current situation” and “future expectations” of small business owners for six key measures: financial situation, cash flow, revenues, capital allocation, job hiring, and credit availability.

While the “present situation” score increased one point from last quarter, a 4-point drop in “future expectations” contributed to the overall Index decline, driven by business owners’ anticipation of lower capital spending and reduced credit availability.

About the Small Business Index:
For the last 21 quarters, the Wells Fargo/Gallup Small Business Index has surveyed small business owners on their current and future perceptions of their business financial situation. The Index consists of two dimensions: 1) Owners’ ratings of the current situation of their businesses and, 2) Owners’ ratings of how they expect their businesses to perform over the next 12 months. An Index score of zero reflects that an equal number of small business owners are optimistic and pessimistic about their companies’ situation. Results are based on telephone interviews with 610 small business owners nationwide conducted July 7-17, 2008. The margin of sampling error is +/- 4 percentage points.

About the Gallup Organization
For more than 60 years, the Gallup Organization has been a recognized leader in the measurement and analysis of people’s attitudes, opinions and behavior. While best known for the Gallup Poll, founded in 1935, Gallup’s current activities consist largely of providing marketing and management research, advisory services and education to the world’s largest corporations and institutions.

About Wells Fargo: Wells Fargo & Company is a diversified financial services company with $609 billion in assets, providing banking, insurance, investments, mortgage and consumer finance through almost 6,000 stores and the internet (wellsfargo.com) across North America and elsewhere internationally. Wells Fargo Bank, N.A. is the only bank in the U.S., and one of only two banks worldwide, to have the highest possible credit rating from both Moody’s Investors Service, “Aaa,” and Standard & Poor’s Ratings Services, “AAA.”

Wells Fargo is America’s #1 small business lender in total dollar volume according to the most recent Community Reinvestment Act data (2006) and the #1 SBA 7a bank lender in total dollar volume. Wells Fargo has loaned more than $36 billion to women, African American, Latino and Asian business owners since 1995. For more information, speak with a Wells Fargo banker, visit wellsfargo.com/biz or call the National Business Banking Center at 1-800-CALL-WELLS.

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Discuss this article

CC33 September 11, 2008

Business optimism down. What is there to be optimistic about? Show us the yellow brick road.

Ben September 11, 2008

Hey CC33, even if we show you the yellow brick road, would it matter? The gas mileage to travel it would be prohibitive enough. Try the shorter yellow gravel bikepath.

High gas prices, utility prices, and health care costs are putting too many speed bumps and pot holes on my road to success. Oh, did I mention liability insurance costs — another hit on businesses.

Publius September 11, 2008

Ben, See, when you bike, you don’t use fuel. Or do you? Er, the tires, the metal, the rubber, okay. So you simply don’t use as much. And, the way our road projects go, there would be so much congestion on the road that the bike lane would be the only way to go. See, ride your bike, save the planet.

Sound like a plan?

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