Small Businesses Pessimistic about Future

Originally published by: Wells FargoNovember 29, 2012

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The Wells Fargo/Gallup Small Business Index tumbled 28 points during the fourth quarter to -11, as businesses became increasingly worried about next year’s financial prospects. The 28-point drop is the largest decline since the fourth quarter of 2008, when the index fell 35 points. That earlier survey period also included the presidential election but was also weighed down by concerns surrounding the financial crisis.

Moreover, that earlier drop was nearly evenly split between worries about current conditions and the future, which was understandable given the nearly unprecedented deterioration in financial conditions during that period. Today’s concerns are primarily about 2013 and all of the uncertainty surrounding how tax and policy changes will impact sales and operating expenses.

The most jarring result is how much expectations for future revenues and cash flows have deteriorated. The proportion of small businesses stating that they expect their revenues to decrease over the next 12 months jumped 11 points in the fourth quarter to 29 percent, while the proportion expecting revenues to increase fell 6 points to 37 percent.

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