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Discover(R) Small Business Watch(SM): Small Business Economic Confidence Increases For Second Consecutive Month

August 25, 2008

Small Businesses Owners Feel Better About Overall Economic Conditions

POLL: FEW BUSINESS OWNERS TAKE ACTIVE POLITICAL ROLE Most Say Campaigns Haven't Created Forum for Their Issues, Affordable Healthcare Still a Major Concern

RIVERWOODS, Ill.--(BUSINESS WIRE)--Aug. 25, 2008--Small business owners' economic confidence rose for the second straight month in August, climbing away from a 22-month low in June as their concerns about the state of the overall economy improved. The Discover(R) Small Business Watch(SM) reached 86.9 in August, up 2.3 points from July and more than 15 points higher than June.

"We saw an increase in their confidence in the direction of the overall economy, but that was offset by more owners saying they're having cash flow issues," said Ryan Scully, director of Discover's business credit card. "Their perceptions of the conditions for their own businesses were flat, making this gain harder to pin down. There is still a great amount of caution out there."

August Key Findings:

-- The number of owners who think the economy is getting worse dropped to 60 percent from 71 percent in July. In addition, 23 percent of small business owners feel the U.S. economy is getting better, which is the highest rating since August 2007.

-- 51 percent rate the economy as poor, a decrease from 54 percent in July; while 15 percent ranked it as good, up from 11 percent in July.

-- 42 percent say they have experienced cash flow issues over the last 90 days, a significant increase from 33 percent in July 2008.

-- Perceptions of their own circumstances remained flat this month: 30 percent of owners say economic conditions for their business are getting better, up slightly from 28 percent in July, while 44 percent say conditions are getting worse, up just a point from 43 percent in July.

POLL: Three Out of Four Business Owners Don't Contribute to Campaigns; More Than Half Think Election Provides No Forum for Their Issues

As a segment, small business owners are not a politically active group. Only about one quarter of all small business owners have donated time or money to a candidate this year. And 75 percent said they would never consider running for office.

Fifty-three percent of small business owners do not believe the 2008 election has provided a forum for small business owners to be heard by the candidates while 33 percent said they weren't sure. Only 14 percent believe small business issues are being heard on the campaign trail.

"It's not that surprising that small business owners are less apt to get involved in the political process," Scully said. "They are so fiercely independent and hard working that, for one, they don't have a lot of leftover time or money to donate; and two, they don't have the lobbying power in Congress that larger corporations do."

The economy continues to rank as the most important issue for small business owners during this presidential election year. Forty-three percent of owners believe that the economy is the number one issue for this year's candidates, down slightly from the 47 percent who cited the economy as the most important issue in March 2008.

Other top issues that ranked a distant second include:

-- National Security at 11 percent, up 3 percent from March;

-- Healthcare at 10 percent, up 2 percent from March;

-- The War in Iraq at 10 percent, down 1 percent from March;

-- Government Ethics and Corruption at 10 percent, up 2 percent from March; and

-- Immigration at 8 percent, down from 12 percent in March.

On the issues, healthcare remains a growing concern. Three out of four small business owners, 72 percent, do not offer health care to their employees. And it is apparently getting harder to find: 70 percent of owners say that finding affordable healthcare for themselves and their employees is very or somewhat difficult, up from 69 percent in January 2008 and 67 percent in January 2007.

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
or
Robinson Lerer & Montgomery
Daniel Delson, 646-805-2036

SOURCE: Discover Financial Services