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Small Businesses’ Optimism On Economy Up Sharply
Business Investment Increases and Cash Flow Improvements Drive Higher Small Business Confidence in October Discover® Small Business WatchSM
October 30, 2006
Riverwoods, Illinois, October 30, 2006
– The Discover® Small Business WatchSM
rose sharply in October 2006 as business owners
reported improvements in cash flow and greater
willingness to invest in business development.
The Watch, based on surveys with 1,000 small business
owners, rose to 120 from 107.7 in September.
Among those factors driving the improvement
in October: - Forty-four percent of small
business owners rated the economy as “excellent”
or “good” while only 22 percent rated it as poor.
- Only
34 percent of small business owners said they
experienced temporary cash flow issues over the
past 90 days, down from 39 percent in both September
and August. Similarly, 61 percent reported no
cash flow issues, up from 58 and 59 percent in
the first two months of the survey, respectively.
- More
small businesses (33 percent v. 30 percent last
month) indicated they will increase spending on
business development activities, and fewer (32
percent v. 38 percent last month) said they would
decrease investment spending.
“The small
business economy continues to sustain its upward
momentum,” said Sastry Rachakonda, Director, Discover
Business Card. “There appears to be a significant
correlation between rising business confidence,
falling energy costs and a record-breaking stock
market, among other indicators. This may be a
reason we are also seeing less cash flow issues
as well.”
Scott Rasmussen, President
of Rasmussen Reports, the independent research
firm that conducts the Discover Small Business
Watch, observed: “The significant increase in
this month’s index is consistent with the rise
in consumer and business confidence reflected
in other economic indicators over the past sixty
days, most of which have been rising strongly.”
Spotlight on Immigration: Small
business owners embrace legal immigrants and their
contributions to the economy, but one in three
feels illegal immigrants reduce their income:
- Among small business owners, 76 percent
felt that legal immigrants help the economy and
75 percent of them felt that legal immigrants
make a positive contribution to the economy.
- However some of the small businesses
(30 percent) feel that immigrants working illegally
in the U.S. reduce their business income. This
view is strong among the smallest business owners
in this category – defined as those with revenues
of less than $40,000 a year or who have been in
business a year or less – where the number jumps
to nearly 50 percent.
- Only 19
percent of the small businesses feel that changes
in immigration law would have any impact – positive
or negative – on their business.
Consumers
also strongly support legal immigration, and are
ready to put their money where their mouth is
when it comes to immigration policy:
- Sixty nine percent said that legal
immigrants made a positive contribution to the
society.
- Sixty percent said they
are happy to pay higher prices to businesses that
hire only legal immigrants and U.S. citizens.
- Fifty
three percent would shop elsewhere if they learned
that a business had illegal workers on the payroll.
Rachakonda
continued: “The Discover Small Business Watch
really underlines our commitment to our customers
– the main street business owners of America.
Clearly, there are issues outside the control
of small business owners that put pressure on
their earnings. We are committed to finding solutions
that can help them get more control and flexibility
around their finances and help them manage their
expenses and spending better.”
About
the Small Business Watch:
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, a segment that consists of 22
million businesses producing more than a trillion
dollars in annual receipts. The Watch is based
on a national random survey of 1,000 small business
owners conducted by Rasmussen Reports, LLC (www.rasmussenreports.com),
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. In addition
to generating the index, the Small Business Watch
surveys small business viewpoints on key business
drivers, and also surveys 4,000 consumers to gauge
purchasing behavior and attitudes towards small
businesses.
About Discover Financial
Services LLC
Discover Financial
Services LLC, a business unit of Morgan Stanley
(NYSE: MS), operates the Discover Card with more
than 50 million Cardmembers, and the Discover
Network with more than 4 million merchant and
cash access locations. Discover Financial Services
also operates the PULSE ATM/debit network, which
serves over 4,200 financial institutions and includes
almost 250,000 ATMs and approximately 3.4 million
POS terminals. For more information, visit www.discovercard.com,
www.discovernetwork.com
or www.pulse-eft.com.
The views and opinions expressed
by small business owners and consumers who participate
in the Small Business Watch survey are their own
and do not necessarily reflect those of Discover
Financial Services or its affiliates.
# # #
Media Contacts:
Laura Gingiss
Discover Financial
Services LLC
224-405-0185
lauragingiss@discoverfinancial.com
Daniel Delson
Robinson Lerer &
Montgomery
646-805-2036
dmd@rlmnet.com
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