Results show diminished expectations for financial situation, cash flow and revenues

SAN FRANCISCO--(BUSINESS WIRE)-- After two consecutive quarters of increased optimism, the latest Wells Fargo/Gallup Small Business Index survey revealed a decline in small business owner optimism from Q1 2011 levels. Conducted April 4-8, 2011, the Index score dropped 12 points from last quarter and now sits at a score of zero indicating that small business owners, as a group, are neutral -- neither optimistic nor pessimistic -- about their companies’ situations. Credit availability concerns remain unchanged with about one-third reporting that obtaining credit would be somewhat or very difficult. Fewer business owners demonstrate confidence in their financial situation, revenues and cash flow over the next 12 months.

“Weaker U.S. consumer spending in the first quarter, along with a spike in energy prices, is likely behind much of the slide in small business optimism since January,” said Dr. Scott Anderson, Wells Fargo senior economist. “On the bright side, for the second quarter, optimism remains above the negative territory we experienced throughout 2009 and 2010.”

The Index is the sum of the “present situation” (previous 12 months) and “future expectations” (next 12 months) of business owners for six key measures, including financial situation, cash flow, revenues, capital spending allocation, job hiring and credit availability.

The present situation declined slightly to negative 14 (-14) from negative 10 (-10) driven primarily by declines in financial situation and cash flows. The present situation score has been in negative territory since the first quarter of 2009.

Despite an eight percentage point decrease from 22 in January to 14, the future expectations component of the Index remains in positive territory. The decline was driven by decreased expectations for financial situation and cash flows.

“Business owners entered the New Year with increasing optimism, but it appears that slow economic growth is interfering with that momentum,” said Doug Case, Wells Fargo small business segment manager. ”Without clear signs of sustained economic growth, businesses remain cautious, and that caution translates into reduced hiring and expansion.”

The following key measures served as the main drivers of the Index score during this survey period:

Present Situation (past 12 months)

• Financial Situation – 47% rated their current financial situation as very or somewhat good, down from 53% in Q1; additionally 33% rated their current financial situation very or somewhat poor, up from 27% in Q1.
• Cash Flow –38% rated their company’s cash flow as very or somewhat good, down from 43% in Q1; additionally 38% rated their cash flow as very or somewhat poor, up from 33% in Q1

Future Expectations (next 12 months)

• Financial Situation – 58% expect their company’s financial situation to be very or somewhat good, down from 65% in Q1; additionally 22% expect their company’s financial situation to be very or somewhat poor, up from 17% in Q1
• Cash Flow – 27% expect that their company’s cash flow will be very or somewhat poor, up from 22% in Q1

“Wells Fargo is committed to supporting business owners through the challenges and opportunities they face as a result of the economic environment,” said Case.

For more Index results and to hear a podcast by Dr. Scott Anderson, visit the Small Business Index section of Wells Fargo’s Business Insight Resource Center at www.wellsfargobusinessinsights.com/small-business-index

About the 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 602 small business owners in all 50 United States conducted April 4-8. 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.

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.

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.2 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet (wellsfargo.com and wachovia.com), and other distribution channels across North America and internationally. With approximately 280,000 team members, Wells Fargo serves one in three households in America. Wells Fargo & Company was ranked No. 19 on Fortune’s 2010 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

Wells Fargo is America’s #1 small business lender (2009 Community Reinvestment Act government data) and a leading lender to women- and diverse-owned businesses. With the nation’s largest network of retail banking stores, and an award-winning online Business Insight Series (www.wellsfargobusinessinsights.com) including videos, webcasts and articles, Wells Fargo provides business owners with timely advice and information to educate and help them succeed financially. For more information, or to speak with a Wells Fargo banker, visit wellsfargo.com/biz or call the National Business Banking Center at 1-800-CALL-WELLS.

Note: Complete survey results available upon request or at www.wellsfargobusinessinsights.com/small-business-index

Wells Fargo
Jen Schow, 415-222-2135
schowjl@wellsfargo.com

Source: Wells Fargo & Company