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Wells Fargo Small Business Index: Business Owners Turn Pessimistic in Post-Election Environment

  Wells Fargo Small Business Index: Business Owners Turn Pessimistic in
  Post-Election Environment

 One in five owners expect to decrease hiring – a new high – and one in three
         expect to decrease capital spending over the next 12 months

Business Wire

SAN FRANCISCO -- November 30, 2012

Small business owners as a group are now the most pessimistic they have been
since the third quarter of 2010, according to the latest Wells Fargo/Gallup
Small Business Index. The Index fell 28 points to negative 11 (-11) in the
post-election survey conducted Nov. 12-16, 2012. Key drivers of this decline
include business owner concerns about their future financial situation, cash
flow, capital spending, and hiring over the next 12 months.

“This is an eye-opening drop in optimism and shows the level of caution that
exists among small business owners today,” said Marc Bernstein, head of Small
Business for Wells Fargo. “Business owners who navigated through the Great
Recession now face more uncharted territory created by ongoing uncertainty in
Washington. These owners know that potential federal government spending cuts
and tax changes can create a ripple effect, hitting the pocketbooks of
consumers and reducing spending that could hit small businesses hard.”

Wells Fargo, together with Gallup, surveys small business owners quarterly
across the nation to gauge their perceptions of their present situation (past
12 months) and future expectations (next 12 months) in six key areas:
financial situation, cash flow, revenues, capital spending allocation, hiring,
and credit availability.

The November decline in the Index was disproportionately impacted by a drop of
19 points in the Future Expectations score compared to a drop of 9 points in
the Present Situation score.


Index Scores: Q4 2011 – Q4 2012

                     Overall        Present           Future
                        Index            Situation           Expectations
                    Score                           
Q4 2012
                     -11            -10               -1
(surveyed
November 2012)
Q3 2012
                     17             -1                18
(surveyed July
2012)
Q2 2012
                     23             -1                24
(surveyed April
2012)
Q1 2012
                     15             -6                21
(surveyed January
2012)
Q4 2011
                     -3             -11               8
(surveyed October
2011)
                                                             

Jobs

Likely related to owners’ pessimism, one in five small business owners (21
percent) expects to decrease the number of jobs at their company over the next
12 months – the largest percentage of small businesses expecting to reduce
jobs since the inception of the Wells Fargo/Gallup Small Business Index in
2003. One in four owners (26 percent) reported a reduction in the number of
jobs at their company over the past 12 months, representing the largest
percentage since the fourth quarter of 2010.

Revenues

Despite improvements in consumer spending over the past few months, 44 percent
of business owners said their revenues have decreased a little or a lot in the
past 12 months, up from 38 percent in July. Looking ahead 12 months, 29
percent of business owners expect lower revenues, up 11 points from the prior
reading and the highest percentage of small businesses expecting decreasing
revenues since Q2 2009.

Capital Spending

One in three (34 percent) small business owners expects to decrease their
capital spending in the next 12 months. This is up from 24 percent in July and
the highest number of owners expecting to lower their future capital spending
since the third quarter of 2010. A larger percentage of business owners (40
percent) reported decreased capital spending over the past 12 months.

Financial Situation & Cash Flow

The number of business owners expecting to be in a “poor” financial position
over the next 12 months increased to 28 percent in November while the
percentage expecting “poor” cash flow increased to 30 percent – both at their
highest level since the Index began in 2003.

Small Business Index Key Drivers

Statistically significant changes were seen in five of the six survey
components – Jobs, Revenues, Capital Spending, Financial Situation, and Cash
flow. Ease of Obtaining Credit did not have statistically meaningful changes
this quarter.

Present Situation (past 12 months)

  *Jobs – 26 percent reported the number of jobs at their company decreased a
    little or a lot, up from 21 percent in Q3 2012
  *Revenues – 44 percent said revenues decreased a little or a lot, up from
    38 percent in Q3 2012
  *Capital spending – 18 percent said their capital spending increased a
    little or a lot, down from 23 percent in Q3 2012; 40 percent indicated
    their capital spending decreased a little or a lot, up from 34 percent in
    Q3 2012

Future Expectations (next 12 months)

  *Jobs –21 percent expect the number of jobs at their company to decrease a
    little or a lot, up from 10 percent from Q3 2012
  *Revenues – 37 percent expect revenues to increase a lot or a little, down
    from 43 percent in Q3 2012; 29 percent expect revenues to decrease a lot
    or a little, up from 18 percent in Q3 2012
  *Capital spending – 34 percent expect the amount their capital spending to
    decrease by a little or a lot, up from 24 percent in Q3 2012
  *Financial situation – 50 percent expect their company’s financial
    situation to be very good or somewhat good, down from 59 percent in Q3
    2012; 28 percent expect their company’s financial situation to be poor or
    very poor, up from 20 percent in Q3 2012
  *Cash flow – 44 percent expect their cash flow to be very or somewhat good,
    down from 51 percent in Q3 2012; 30 percent expect their cash flow to be
    somewhat poor or very poor, up from 23 percent in Q3 2012

A downloadable report is available on the Small Business Index section of
Wells Fargo’s Business Insight Resource Center.

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 607 small business owners in all 50 United
States conducted Nov. 12-16, 2012. 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 Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified,
community-based financial services company with $1.4 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 has offices in more than 35 countries to support the bank’s customers who
conduct business in the global economy. With more than 265,000 team members,
Wells Fargo serves one in three households in the United States. Wells Fargo &
Company was ranked No. 26 on Fortune’s 2012 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 loans more money to America’s small businesses than any other bank
(2002-2010 Community Reinvestment Act government data) and is a leading lender
to women- and diverse-owned businesses. With the nation’s largest network of
retail banking stores, and an online library of videos, articles and webcasts
known as the Business Insight Resource Center
(www.wellsfargobusinessinsights.com), 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.

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.

Contact:

Wells Fargo & Company
Jen Hibbard, 415-222-2135
jen.hibbard@wellsfargo.com
Jim Seitz, 612-316-2447
jim.seitz@wellsfargo.com
 
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