Small Business Economic Confidence Dropped to New Low in June

Small business owners are feeling lousy about the U.S. economy, according to the latest national survey of owners for the Discover Small Business Watch, a monthly index conducted for card issuer and processing network that measures the mood of U.S. small business owners who employ less than five employees.

Discover Financial Services reported this morning that the index “plummeted in June to 71.8, down 10 points from 81.8 in May,” setting a record low for the gauge. Meanwhile, the number of the owners who think the U.S. economy is getting worse expanded to nearly 80 percent.

“With prices rising, especially gas and food, just about everybody is feeling the squeeze,” Ryan Scully, director of Discover’s business credit card, said in a statement. “People are starting to change their habits and cut back. For small business owners who are seeing profits go down as a result, that means they have less to invest in finding new business.”

The Discover Small Business Watch is a monthly index measuring the relative economic confidence of 22 million U.S. small business owners.The Watch is based on a national random survey of 1,000 small business owners conducted by Rasmussen Reports, LLC, an independent survey research firm. The numeric index is calculated by assigning values to responses to a set of six consistent questions. The base value of the Watch was established at 100.0 based on surveys conducted in August of 2006.

The survey found that 79 percent of the owners think the U.S. economy is getting worse – an increase from 71 percent in May and the highest level recorded since the inception of the Watch in August 2006. More than half the owners say that economic conditions for their business are getting worse, and 58 percent rated the economy as poor, an increase from 50 percent in May.

Forty-two percent have experienced cash flow issues over the last 90 days, an increase from 39 percent in May, and 75 percent of owners will be decreasing or making no changes in what they spend over the next six months on business development activities such as advertising, inventories, and capital expenditures.

As far as adding jobs, eight percent of owners have plans to hire in the next few months, while 79 percent are making no changes and 10 percent plan to lay off workers.