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Opinions and views from expert CFOZone members.

Dec 29

Small businesses gloomy as New Year approaches

Posted by dbedell in RiskeconomyCash


As spending soared above even optimistic predictions this holiday season, small business owners are still far from optimistic about economic recovery as a whole, according to a survey by Discover Small Business Watch.

Discover's monthly index of small business confidence fell for the first time in three months in December, even as consumer spending soared. The index fell to 81.6 from 87.2 in November, a drop of 5.6 points.

Meantime, spending increased 5.5 percent in the 50 days leading up to Christmas, according to MasterCard Advisors' SpendingPulse report.

This was a much bigger rise than was predicted by even bullish analysts, according to the report. Almost every retail category saw increased sales over the period, providing benefit to the full range of consumer products retailers, the report noted.

This would seem to suggest that confidence should be rising among small business owners, and yet the opposite is true, as the Discover survey points out.

In fact, 51 percent of small business owners surveyed said the economy is getting worse, and 43 percent expect economic conditions to worsen for their businesses in the first half of 2011.

Plus, 62 percent rate the economy as being in poor condition right now, making the expectation of worsening conditions that much bleaker.

Part of this perception can perhaps be explained by the fact that many small businesses continue to struggle to get funding and meet basic financing needs.

Respondents to the Discover survey reported that temporary cash flow issues have made it difficult to stay current with bills--45 percent of small business respondents reported temporary cash flow issues within the last 90 days.

In addition, much of the benefit of the increased holiday spend may in fact be going to big box store chains-rather than trickling through to small businesses.

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