Small-Business Owners Not Seeing Economic Improvement

After three consecutive months of gains, the latest Discover Small Business Watch index fell to 87.7 in September, down 2.1 points from August, the company reported.

"Although slightly lower this month, small business confidence has been on a gradual climb since May, so this looks more like a pause than a reversal," said Ryan Scully, director of Discover's business credit card. "A lot of people are eager for a definitive signal that the economy is on the mend, but America's small-business owners aren't sending that message yet."

When asked whether they agree or disagree that the recession is over for their businesses, 69 percent of small-business owners disagreed, only 13 percent agreed and another 18 percent couldn't be sure.

Among other highlights of the report:

• 50 percent of small-business owners say they plan to decrease spending on business development activities such as advertising, inventory and capital expenditures, a jump from 43 percent in August. Similarly, those who plan to increase spending fell to 25 percent from 27 percent in August, and 22 percent are planning no changes.

• 53 percent of small-business owners rate the economy as poor, up from 48 percent in August; 36 percent rate it as fair; and 10 percent say it is excellent or good.

• 46 percent of small-business owners think the economy is getting worse, up from 43 percent in August but still down considerably from 73 percent one year ago. This month 33 percent of owners say the economy is getting better, down from 38 percent in August; 18 percent say it's the same, up from 15 percent in August; and 3 percent aren't sure.

• 46 percent of owners say they have experienced cash-flow issues in the past 90 days, down from 51 percent in August and 53 percent in July.

• The perception of their own economic conditions remained relatively flat: 29 percent of small business owners see economic conditions for their businesses improving, down one percentage point from August, while 45 percent see their own conditions getting worse, up one percentage point over last month. The number of those who said things are the same went down to 22 percent in September from 23 percent in August.

Nearly half of small business owners, 46 percent, are expecting that their final quarter of 2009 will be worse than their 2008 fourth quarter, with 21 percent expecting year-over-year improvement, and 30 percent expecting the same results.