Discover® Small Business Watchsm: Small Business Economic Confidence Slips; More Than Two-Thirds Of Small Business Owners Still Feeling The Recession

September 28, 2009

Nearly Half Expect Worse Holiday Quarter Than ‘08

REAL ESTATE: Only 6% of Small Business Owners Are Having Mortgage Trouble
HEALTHCARE DEBATE: Should Everybody Have to Pay?

RIVERWOODS, Ill.--(BUSINESS WIRE)--Sep. 28, 2009-- American small business owners tempered their economic outlook this month, remaining cautious about perceived improvements in the economy. After three consecutive months of gains, the latest Discover® Small Business WatchSM index fell to 87.7 in September, down 2.1 points from August.

“Although slightly lower this month, small business confidence has been on a gradual climb since May, so this looks more like a pause than a reversal,” said Ryan Scully, director of Discover's business credit card. “A lot of people are eager for a definitive signal that the economy is on the mend, but America’s small business owners aren’t sending that message yet.”

When asked whether they agree or disagree that the recession is over for their businesses, 69 percent of small business owners disagreed, only 13 percent agreed and another 18 percent couldn’t be sure.

September Highlights:

  • 50 percent of small business owners say they plan to decrease spending on business development activities such as advertising, inventory and capital expenditures, a jump from 43 percent in August. Similarly, those who plan to increase spending fell to 25 percent from 27 percent in August, and 22 percent are planning no changes.
  • 53 percent of small business owners rate the economy as poor, up from 48 percent in August; 36 percent rate it as fair and 10 percent say it is excellent or good.
  • 46 percent of small business owners think the economy is getting worse, up from 43 percent in August but still down considerably from 73 percent one year ago. This month 33 percent of owners say the economy is getting better, down from 38 percent in August; 18 percent say it’s the same, up from 15 percent in August; and 3 percent aren’t sure.
  • 46 percent of owners say they have experienced cash flow issues in the past 90 days, down from 51 percent in August and 53 percent in July.
  • The perception of their own economic conditions remained relatively flat: 29 percent of small business owners see economic conditions for their businesses improving, down one percentage point from August, while 45 percent see their own conditions getting worse, up one percentage point over last month. The number of those who said things are the same went down to 22 percent in September from 23 percent in August.

Outlook Darker for Remainder of 2009

Nearly half of small business owners, 46 percent, are expecting that their final quarter of 2009 will be worse than their 2008 fourth quarter, with 21 percent expecting year-over-year improvement, and 30 percent expecting the same results.

Real Estate: Most Owners, Consumers Staying Ahead of Mortgage Payments

Of the 87 percent of small business owners who say they own a home, only 6 percent reported being in foreclosure or behind on their mortgage payments. That matches the trend among consumers. This month, the Watch also polled 3,000 consumers this month to find that only 5 percent of homeowners reported problems with their mortgages.

Health Debate: Should Everyone Pay?

Sixty-five percent of small business owners say it is difficult or somewhat difficult to obtain affordable healthcare and another 21 percent said it was not very, or not at all difficult; 15 percent weren’t sure.

When it comes to who should ultimately pay for health insurance, a majority of small business owners and Americans, in general, agree that individuals who can afford to pay for health insurance should be required to do so: 56 percent of small business owners and 55 percent of consumers say that Americans with the means should contribute to paying for their own healthcare. Twenty-nine percent of both groups disagreed and about 15 percent weren’t sure.

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 have 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 750 small business owners. It is commissioned by 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 2006. In addition to generating the index, the Small Business Watch surveys small business owners every month on key issues, and polls 3,000 consumers four times per year to gauge purchasing behavior and attitudes towards small businesses. For past results and survey data, visit www.discovercard.com/business/watch. For information on Discover Business card, visit www.discovercard.com/business.

About Discover

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. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America's cash rewards pioneer, and offers student and personal loans, as well as savings products such as certificates of deposit and money market accounts. Its payments businesses consist of 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.

Source: Discover Financial Services

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