Market Overview

Wells Fargo Survey: Small Business Optimism Hits Record High Amid Strong Economy

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Among key drivers in rising Index score: More business owners report
positive financial situation

Small business optimism is at an all-time high in the latest quarterly Wells
Fargo/Gallup Small Business Index
, conducted July 11-18, 2018.

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The
survey
, which measures small business optimism, had an overall Index
score of 118, 12 percentage points higher than last quarter and the
highest level in the survey's 15-year history. The current Index score
was driven by high indicators from small business owners on their
overall financial situation, cash flow and ability to obtain credit. The
news comes as the U.S. economy grew 4.1 percent in the second quarter,
according to the U.S. Department of Commerce, outperforming an average
growth rate of 2.3 percent from the fourth quarter of 2012 to the first
quarter of 2018.

"Small business owners continue to feel confident about their business'
current and future financial situation as the economy continues to show
positive growth," said Andy Rowe, Wells Fargo head of Customer Segments.
"We are hopeful the unprecedented optimism among business owners will
translate into an increase in business investments, and more Main Street
small business growth."

Positive financial outlook

Confidence in the economy was reflected in small business owner
attitudes about their current and future financial situation. In the
July Wells Fargo/Gallup Small Business Index, 78 percent of small
business owners reported their financial situation today is very or
somewhat good, and 84 percent of business owners said they expect their
financial situation will be very or somewhat good a year from now.

In addition, both current and projected future cash flow were key
drivers of small business optimism, with 69 percent classifying their
cash flow over the past 12 months as very or somewhat or good, an
increase of 6 percentage points from the previous quarter and the
highest reading in the history of the survey. Over the next year, 77
percent expect their cash flow to be very or somewhat good.

Small business owners also reported on their ability to obtain credit
when they need it, with 49 percent saying they expect it will be very or
somewhat easy to obtain credit over the next 12 months. That's up five
percentage points over last quarter and the highest reading on this
measure since 2007.

Even as optimism soared, small business owners' sentiment about their
company revenues remained relatively consistent with the previous
quarter. About half of respondents said their revenues increased over
the last 12 months, and 61 percent said they expect company revenues
will increase over the next 12 months.

Challenges in hiring and retaining staff remain

For the second consecutive quarter, survey respondents said hiring and
retaining staff was their top challenge, at 18 percent. It could remain
a challenge in the year ahead, as 35 percent of firms said they expect
an increase in the number of jobs at their company in the next year.
Other top challenges cited by business owners include taxes (9 percent)
and attracting new business (9 percent), which have been consistently
reported among the top issues of small business owners.

Companies see limited competition from online retailers

The vast majority of small business owners (80 percent) noted that their
business did not currently compete with large e-commerce companies and
retailers. Additionally, about two-thirds of business owners said the
shift from brick-and-mortar stores to online retailers does not impact
their business.

Some small business owners, however, are continuing to increase their
digital presence to compete in an increasingly digital marketplace.
While only one quarter of business owners said they currently conduct 25
percent or more of their business online, the number of respondents who
expect to conduct at least this much business online in the next five
years was 37 percent. Additionally, 54 percent of respondents said they
are at least somewhat likely to increase their online and social media
marketing efforts over the next 12 months.

 

Wells Fargo/Gallup Small Business Index Scores: Q3 2017 – Q3
2018

       

Overall Index
Score

     

Present
Situation

     

Future
Expectations

Q3 2018 (surveyed July 2018)       118       52       66
Q2 2018 (surveyed April 2018)       106       45       61
Q1 2018 (surveyed January 2018)       107       42       65
Q4 2017 (surveyed October 2017)       103       43       60
Q3 2017 (surveyed July 2017)       106       45       61
                 

About the Wells Fargo/Gallup Small Business Index

Since August 2003, the Wells Fargo/Gallup Small Business Index has
surveyed small business owners on 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. Results are based on telephone
interviews with 604 small business owners, with annual revenues up to
$20 million, in all 50 United States conducted July 11-18, 2018. The
overall Small Business Index is computed using a formula that scores and
sums the answers to 12 questions — six about the present situation and
six about the future. An Index score of zero indicates that small
business owners, as a group, are neutral – neither optimistic nor
pessimistic – about their companies' situations. 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 +118 in the third quarter of 2018, and the
lowest reading was -28 in the third quarter of 2010.

About Wells Fargo

Wells Fargo & Company (NYSE:WFC) is a diversified, community-based
financial services company with $1.9 trillion in assets. Wells Fargo's
vision is to satisfy our customers' financial needs and help them
succeed financially. Founded in 1852 and headquartered in San Francisco,
Wells Fargo provides banking, investments, mortgage, and consumer and
commercial finance through 8,050 locations, 13,000 ATMs, the internet
(wellsfargo.com) and mobile banking, and has offices in 38 countries and
territories to support customers who conduct business in the global
economy. With approximately 265,000 team members, Wells Fargo serves one
in three households in the United States. Wells Fargo & Company was
ranked No. 26 on Fortune's 2018 rankings of America's largest
corporations. News, insights and perspectives from Wells Fargo are also
available at Wells
Fargo Stories
.

Wells Fargo serves approximately 3 million small business owners across
the United States and loans more money to America's small businesses
than any other bank (loans under $1 million, 2002-2016 Community
Reinvestment Act government data). To help more small businesses achieve
financial success, Wells Fargo introduced Wells
Fargo Works for Small Business®

a broad initiative to deliver resources, guidance and services for
business owners. For more information about Wells Fargo Works for
Small Business,
visit: WellsFargoWorks.com.
Follow us on Twitter @WellsFargoWorks.

About Gallup

For more than 70 years, Gallup 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.

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