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Discover® Small Business Watchsm: Optimism Increases For Small Business Owners

October 25, 2010

Increased Hope for the Economy, Steady Cash Flow Prompt Biggest Index Gain Since April
POLL: Small Business Owners More Likely to Vote Republican, Say GOP-controlled Congress Would Have More Impact on Economy

RIVERWOODS, Ill., Oct 25, 2010 (BUSINESS WIRE) -- Small business economic confidence rebounded in October as more small business owners report economic conditions for their businesses and for the country are getting better, according to the Discover® Small Business WatchSM. The monthly index rose to 84.2 in October, up 10.4 points from 73.8 in September - the biggest one month gain since April.

"The fall season has ushered in more positive views of the economy, but in this politically charged atmosphere, small business owners are likely in a holding pattern with the rest of us to see how the economy responds after Election Day," said Ryan Scully, director of Discover's business card. "When we asked small business owners whether there would be a greater impact on the economy if Republicans win control of Congress or Democrats remain the majority, they leaned in the direction of having a change."

This month, 28 percent of small business owners expect economic conditions for their businesses to get better in the next six months, up from 20 percent last month; 43 percent think conditions will worsen, down from 55 percent, 24 percent expect them to stay the same.

Perceptions of the overall economy's direction also are improving. In October, 31 percent of small business owners say the economy is getting better, up from 26 percent in September; while 48 percent say it's getting worse, and 17 percent think it's the same.

Other October Confidence Indicators:

  • The outlook for spending on business development is improving: 22 percent of small business owners plan to increase spending, up from 16 percent last month; 46 percent plan to decrease spending, down from 57 percent in September; and 30 percent expect no changes for the next six months.
  • 46 percent of small business owners report having cash flow issues, unchanged from last month; while 50 percent said they do not have cash flow issues.
  • 61 percent of small business owners rate the economy as poor, down from 68 percent last month; 31 percent rate it fair, 5 percent rate it good, and 2 percent rate it excellent.

Survey: Small Business Owners Show More Faith in GOP to Affect Economy

When it comes to the economy, small business owners believe a Republican-controlled Congress would have a greater impact: 51 percent of small business owners say it would be better for the GOP to control Congress, 39 percent said it's better for Democrats to remain in control, and 12 percent aren't sure.

Forty-nine percent of small business owners would choose the Republican candidate if the elections were held today, 38 percent would vote for the Democrat, 4 percent would choose another party and 9 percent are not sure.

The Republican Party comes out on top when it comes to which political party is better at understanding the needs of small business owners, a gap that has widened in the past two years: In October, 45 percent of small business owners gave the nod to Republicans, 30 favored Democrats, and 20 percent said neither party understands their needs. However, a little more than a month prior to the 2008 elections, 43 percent of small business owners thought the GOP represented their interests better with the Democratic Party close behind at 40 percent; rounded out by 5 percent who think another party understands them better, and 12 percent who were not sure.

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 (http://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 http://www.discovercard.com/business/watch. For information on Discover Business card, visit http://www.discovercard.com/business.

About Discover

Discover Financial Services (NYSE: DFS) is a direct banking and 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 personal and student loans, online savings accounts, certificates of deposit and money market accounts through its Discover Bank subsidiary. Its payment 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 more than 185 countries and territories. For more information, visit http://www.discoverfinancial.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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SOURCE: Discover Financial Services

Discover Financial Services
Jon Drummond
224-405-1888
jondrummond@discover.com
or
Burson-Marsteller
Lauren M. Onis
212-614-4069
lauren.onis@bm.com