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Small Business Economic Confidence Rises 4Th Straight Month

November 27, 2006
Riverwoods, Illinois, November 27, 2006 – Small business owners' confidence in the U.S. economy rose for the fourth straight month in November as the Discover® Small Business WatchSM surged 10 points to 130. Powering the rise was a substantial increase in the number of business owners who say that conditions for their business will be better in the next six months.

November Key Findings:

  • Nearly half, or 49 percent, rate the U.S. economy as “Excellent” or “Good,” up from 44 percent in October. Twenty-two percent rate it “Poor,” the same number as the previous month.
  • Forty-five percent say economic conditions for their business will get better over the next six months, up from 37 percent in October. The percentage of owners who feel economic conditions are getting worse dropped to 30 percent, compared to 35 percent last month.
  • Thirty-six percent feel that economic conditions in the U.S. are getting better, compared to 31 percent in October. Those who feel conditions are getting worse dropped to 48 percent, down from 59 percent in August 2006.
“Small business owners are more optimistic and plan to invest further in themselves in the near term,” said Sastry Rachakonda, director of Discover Business Card. “Well over a third, 39 percent, plan to put more money into business development over the next six months, which is up from 32 percent last month. It is heartening to see the small business confidence in the economy as we start the holiday season and head into a new year. ”

Spotlight Poll: Holiday Shopping

Small Retailers Popular With Shoppers Seeking Something Special
  • While 13 percent of consumers surveyed expect to do most of their holiday shopping at a small retail or specialty shop this year, nearly a third, 29 percent, will likely turn to small retail or specialty shops to buy “very special” gifts.
Holiday Tokens Prompt High Loyalty
  • Forty-one percent of consumers indicated that receiving a token of appreciation from a small business during the holiday season would make them more likely to return for future business. This is particularly strong among younger consumers, ages 18 to 29, at 59 percent.
  • Twenty-six percent of small business owners said they would be purchasing holiday gifts for major customers this year. About half of those who buy gifts, 49 percent, spend $25 to $100 on a major customer.
“The fact that many people look to small businesses to buy their most special holiday gifts is a great testimony to the superior service small business owners provide and the trust that consumer place in them.” Rachakonda said. “And, in turn, the holidays give small business owners a chance to thank their customers for their loyalty, and our survey shows that investing in appreciation pays great dividends.”

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 on the Discover® Small Business WatchSM, including past results and survey data, please visit www.discoverbiz.com/watch.
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.

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Media Contacts:

Jon Drummond
Discover Financial Services LLC
224-405-1888
jondrummond@discoverfinancial.com

Daniel Delson
Robinson Lerer & Montgomery
646-805-2036
dmd@rlmnet.com