U.S. small business index rises to 106 – Wells Fargo survey

The Wells Fargo/Gallup Small Business Index survey for the third quarter. The index was up 11 points to 106, marking the highest reading for the survey in over one decade. The survey was conducted in mid-July and takes in second quarter economic activity. U.S. economic growth rebounded at a 2.6 percent rate in the June quarter, after a much slower growth seen earlier in the year.

One of the surprises in the growth report was a rebound in business investment in new equipment that rebounded at an 8.2 percent annual rate in the second quarter. That rebound is also apparent in the Wells Fargo Small Business survey that noted a larger proportion of business owners felt confidence regarding their finances that they are now growing their business.

Around 76 percent of small business owners stated their current financial situation is either quite good or somewhat good, up from 73 percent in the prior quarter. A huge proportion of business owners, 46 percent, continue to report that their revenues have risen in the past year, while the proportion of companies reporting revenues declined dropped to 21 percent and is now even with the all-time series low.

The improvement in small business finances and revenues is in line with what is seen and heard from large public companies this earnings seasons. Profits and revenues have greatly exceeded consensus estimates, amidst stronger overall demand.

The rebound in small business optimism also likely shows the lessening of some major headwinds facing small businesses. Energy prices have improved, boosting opportunities for small businesses throughout the energy patch that had been a major source of small business growth in the decade.