Small Business Sentiment Still Shaky


The majority of small business owners think the U.S. economy is getting worse, though sentiment showed some improvement in May from its recent lows, according to a survey released on Tuesday.

The survey reflects the U.S. economy's struggles with the worst housing slump since the Depression, soaring energy costs and a shrinking job market, although the numbers did show improvement in some areas.

Credit-card provider Discover's Small Business Watch index of confidence rose to 81.8 in May from 76.1 in April. April's was the lowest reading since the monthly survey's launch in August 2006.

According to the report, only 28 percent of business owners said that economic conditions were improving for their businesses, though this was an increase from 24 percent in April.

It showed 71 percent of small business owners thought the U.S. economy was getting worse, a decrease from 76 percent in April.

It also showed 39 percent said they had experienced cash flow issues over the last 90 days, down from 44 percent in April and 47 percent in March.

"Small business owners halted a steady decline in their economic confidence in May as the number of those with cash flow issues decreased to its lowest total in six months," the report said.

Overall, 50 percent of respondents rated the economy as "poor." That was down from 55 percent in April.

The survey showed 12 percent of small business owners planned to hire more workers "over the course of the next few months," and 9 percent would be laying off workers. Two percent said they were not sure and 77 percent expected no change.

Over the next six months, 42 percent expected to decrease spending on business development activities such as advertising, inventories, and capital expenditures and 28 percent projected an increase.

Three percent were unsure and 27 percent saw no change.

The Discover Small Business Watch is a monthly index measuring the relative economic confidence of U.S. small business owners who employ less than five employees.

This segment of the economy consists of 22 million businesses producing more than $1 trillion in annual receipts, according to the report. The watch is based on a national, random survey of 1,000 small business owners, commissioned by the Discover Business Card.