Riverwoods, Illinois, December 26, 2006
– Small business owners' confidence in the U.S.
economy dipped somewhat in December, although
optimism about the year ahead still remains high,
according to the monthly
Discover®
Small Business WatchSM. This month's
Watch fell to an adjusted* 109.7 from its four-month
high of 114.6 in November, pointing to a leveling
of an autumn-long surge in confidence reported
by a survey of 1,000 small businesses with five
or fewer employees.
“Since August, the
Watch has tracked the steadily improving economic
mood of American small business owners,” said
Sastry Rachakonda, director of
Discover
Business Card. “This month's decline is tied
primarily to deterioration in cash flow, which
may indicate a trend or may be a function of the
season. We have seen no change in business credit
card usage."
“The good news is that
owners express optimism about their prospects
for 2007 as nearly two-thirds (64 percent) say
economic conditions for their businesses are the
same or getting better, and four owners in five
(82 percent) claim they will give their employees
some kind of raise next year.”
December
Key Findings: •The number of
owners who experienced cash flow issues in December
causing them to hold off on paying some bills
rose to 42 percent from 39 percent last month.
•The number of owners who planned to
increase spending on business development activities
dropped slightly to 37 percent this month, down
from 39 percent in November, but higher than the
30 to 33 percent range seen from August through
October 2006.
Spotlight Poll:
The Effect of a National Minimum Wage Increase
Employee Costs Not Likely
to Jump with Minimum Wage
•Seventy percent of small business owners say
an increase in the minimum wage to $7.25 per hour
would have no impact on their employee costs.
“This most likely reflects that many small business
owners pay more than the minimum wage to their
employees,” Rachakonda said.
“The Watch
found an overwhelming majority of small businesses
would see no major impact on employee costs due
to a minimum wage increase. However, a significant
number of small business owners (29 percent) did
feel a minimum wage increase would likely affect
the price of goods and services they use.”
Most Consumers Are Willing to Pay
the Price for a Minimum Wage Increase
•The Discover Small Business Watch survey
found that 57 percent of consumers are willing
to pay a higher price at small businesses that
meet minimum wage regulations. Fifty-two percent
of consumers would expect prices to go up as a
result of a minimum wage increase.
•Sixty-six
percent of consumers think a minimum wage increase
will either help or have no impact on small businesses
while 33 percent of consumers think an increase
would hurt small businesses.
Small
Business Owners and Employees Differ on Raise
Expectations •Thirty-seven percent
of small business employees expect a wage increase
in 2007, and 51 percent of them expect a bigger
raise than the previous year.
•Only 9 percent
of small business owners expect to give higher
raises in 2007, while 61 percent of owners plan
to give the same raises as in the previous year.
“This highlights the challenges that
small business owners face: They expect rising
cost pressures yet they also have to consider
employee expectations around the size of their
wage increases,” Rachakonda said.
*
Note: The method for calculating the
Discover Small Business Watch has been revised
slightly, effective with this month's release.
The adjustment does not change the outcomes of
the survey, nor does it change the directional
trends spotted by the Watch, according to Rasmussen
Reports, the conductor of the Discover Small Business
Watch. The revisions, based upon a review of data
collected over the past five months, are intended
to adjust weightings to more closely correlate
with movements in the small business sector of
the U.S. economy. All previous index measures
have been recalculated in line with the adjusted
formula. The index is not seasonally adjusted.
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.
For more information, visit
www.discoverbiz.com.
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:
Jon Drummond
Discover Financial Services
LLC
224-405-1888
jondrummond@discoverfinancial.com
Neena Kadian
Robinson Lerer &
Montgomery
646-805-2058
nkadian@rlmnet.com