Optimism among small business owners fell in the third quarter on concerns about their future financial situation and overall state of the economy, according to the latest reading of the Wells Fargo/Gallup Small Business Index. The index declined six points to 17 from 23 in the second quarter. Possible scores range from a low of -400 to a high of 400, with zero indicating a neutral outlook - neither optimistic nor pessimistic.
Nearly six in 10 business owners (59%) said they expect to be in a good financial position over the next 12 months, down from 66% who said so in second quarter. Those expecting increased revenues in the next 12 months declined by six percentage points to 43, according to the index. Despite the decline in the index score this quarter, business owner optimism improved significantly from two years ago when it dipped to -28, and even last year when business optimism was neutral.
"This is the first drop in the index this year and it seems to correlate to the lower percentage of business owners planning to invest in their companies in the year ahead," Doug Case, Wells Fargo small business segment manager, said in a statement.
More than half of the business owners (53%) reported having made capital investments over the past 12 months, with the majority (70%) purchasing new equipment or machinery. A smaller percentage of business owners (41%) said they plan to make capital investments in the next 12 months. The overwhelming majority of business owners (93%) plan to fund capital expenditures primarily with business revenues and profits rather than relying on credit or savings.
The index is based on telephone interviews with 600 small business owners throughout the United States conducted in July.