Discover(R) Small Business Watch(SM): Small Business Economic Confidence Continues To Slide

October 27, 2008

2 in 3 Small Business Owners Rate Economy as Poor; 3 in 4 See It Getting Worse

POLL: Majority of Small Business Owners Disagree with Wall Street Bailout

Only 16 percent Believe $700 Billion Package Approved by Congress Will Help Them

RIVERWOODS, Ill.--(BUSINESS WIRE)--Oct. 27, 2008--The Discover(R) Small Business Watch(SM) dropped for the second straight month as news of a congressional rescue plan failed to lift the spirits or expectations of the nation's 22 million small business owners. The index slipped 3.2 points in October to 71.4, the lowest confidence rating since the Watch was established in August 2006.

"Faced with a barrage of bad news about financial markets and the economy, small business owners continue to tell us that there is no end in sight to this economic crisis. For the first time, we saw more than 60 percent rate the economy as poor," said Ryan Scully, director of Discover's business credit card. "Most of their plans to invest in their businesses have been on hold for some time."

October Key Findings:

  • 64 percent rate the economy as poor, up from 57 percent in September and the highest rating in this category in the history of the Watch; 8 percent rate the economy excellent or good.


  • 53 percent believe economic conditions for their businesses are getting worse, up from 51 percent in September and equaling the all-time high in the history of the Watch


  • The number of small business owners who think the U.S. economy is getting worse rose one point to 74 percent in October; 9 percent feel the economy is getting better, up slightly from last month's record low 7 percent.


  • 38 percent of small business owners say they have experienced cash flow issues over the last 90 days, down from 42 percent in September.


  • 23 percent plan to increase spending on business development over the next six months, down from 28 percent in September and equaling an all-time low in the Watch; 42 percent plan to decrease spending compared to 44 percent last month; and 33 percent anticipate making no changes, up from 26 percent in September.

Economic Crisis: More than Half of Small Business Owners Disagree with Bailout

Fifty-seven percent of small business owners say they disagree with the $700 billion economic rescue plan that was approved by the Congress and signed by the president earlier this month.

"As we have seen in previous Watch surveys, events on Wall Street do not necessarily reflect the reality for small businesses. That may be one reason so many don't see this rescue plan as bringing much benefit to their business," Scully said. "They seem to have little faith that the government knows how to answer the needs of America's small business owners."

Other Economy Poll Highlights:

  • 69 percent of small business owners are not confident that the federal government and Congress can address their business needs.


  • When asked how the rescue package may affect their business, 53 percent said they do not expect it will have any impact. Only 16 percent think the package will help their business, while 18 percent believe it will hurt.


  • 56 percent of small business owners say that they do not believe that government action can help the economy enough to benefit their business.


  • 77 percent say that economic conditions have not forced them to borrow money to pay their bills. Among those who are seeking loans, 70 percent say it is harder to borrow money right now.

"Small business owners are showing resiliency," Scully said. "Most are not borrowing, but they are taking a hit on their income: 55 percent are taking home less money this month."

Election Poll: Small Business Owners Not Getting Heard; Economy Remains Top Concern

Small business owners continue to believe their issues are not being addressed in the presidential election. Only 19 percent think that this election season has created a forum for them to heard by the candidates.

As it has throughout this election year, the economy remains the biggest issue for small business owners. In all, 47 percent cited the economy as their No. 1 election concern, down slightly from 52 percent in September. The issue of government ethics and corruption rose to 15 percent in October, up from 9 percent in September; followed by national security at 11 percent; the war in Iraq at 10 percent; healthcare at 6 percent; and immigration at 3 percent.

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.

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. It is commissioned by the Discover Business Card, which strives to offer the best business credit card for American small businesses, and is 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 past results and small business survey data, visit www.discovercard.com/business/watch. For information on Discover Business Card, visit www.discovercard.com/business.

About Discover Financial Services

Discover Financial Services (NYSE: DFS) is a leading credit card issuer and electronic payment services company with one of the most recognized brands in U.S. financial services. The company operates the Discover Card, America's cash rewards pioneer. Since its inception in 1986, the company has become one of the largest card issuers in the United States. Its payments businesses consist of the Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in 185 countries and territories. For more information, visit www.discoverfinancial.com.

CONTACT: Discover Financial Services
Jon Drummond
224-405-1888
jondrummond@discover.com
or
Robinson Lerer & Montgomery
Daniel Delson
646-805-2036
dmd@rlmnet.com

SOURCE: Discover Financial Services