Poll: Small-Business Owners More Pessimistic About Next Year

The U.S. Department of Commerce delivered a refreshingly positive report on retail sales Friday. But the downer results of a new Gallup poll suggests that it will take much more than one month of good data to make small-business owners feel optimistic about the short-term future.

First, the good news. The U.S. Census Bureau said that that the Commerce Department's preliminary estimates of retail and food services sales for July were $390.4 billion, which was up 0.5 percent from the previous month. That number was adjusted for seasonal factors, but not for price changes. On a year-over-year perspective, July 2011 retail sales rose 8.2 percent over July 2010. The agency also revised the June figures upward: Instead of the 0.1 percent increase that had been reported, the Census Bureau says sales in June were up by 0.3 percent.

If you look at the July numbers a bit more closely, you'll see that certain categories experienced a sales decrease including building materials and garden supply dealers; sporting goods, hobby, book, and music stores; general department stores; and food services and drinking places. All of these categories recorded an increase in spending one year ago, in July 2010, so that trend is troubling.

Also troubling are the results of a new Wells Fargo-Gallup poll about small-business optimism. The survey reflects telephone interviews with approximately 600 small-business owners in early July, which was when the public angst over raising the U.S. deficit ceiling really began claiming headlines.

The poll showed that the percentage of owners who anticipate that sales would increase over the next 12 months dropped to 42 percent, compared with 49 percent in March and 54 percent in January.

The number of small-business owners that expect to hire over the next year likewise slipped to 16 percent in July, off from 19 percent in April and 23 percent in January. One somewhat positive indicator is that fact that firing intentions did not change all that much. Which is to say that even though few small businesses are creating positions, there has not been a significant increase in the number of small businesses looking to eliminate jobs, either.

The next poll in this series, which will probably be released sometime in October, will be really telling. That's when small-business owners will get to share how they really feel about the developments of the past few weeks, including the Congressional debt deal, the historic downgrade of the U.S. credit rating by Standard & Poor's and the associated stock market plunge, and the Federal Reserve's plan to keep a lid on interest rates. 

Gallup suggests that hiring expectations will probably worsen in the next three months, which is exactly what the economy does not need: "It is essential for policymakers to focus on increasing small-business-owner revenue and cash-flow expectations if the U.S. economy is going to not only avoid recession but begin growing significantly. … While the [Federal Open Market Committee's] intention to keep interest rates low during that time can help with operating costs, it is much less likely to stimulate much-needed consumer spending and generate new hiring.

As I have suggested many times here over the past few weeks, one of the best things that small-business owners can do right now is hold firm to their long-term strategies while realistically revising expectations for the second half of this year. The Wells Fargo-Gallup data suggests that this is exactly what many of them are doing. 

I am all for pragmatism, but I think too many people have been caught up in the short-term turmoil. In order to really help the economy start growing again, more small-business owners need to shake of this pessimism and think like entrepreneurs again. It will take a leap of faith -- in the form of new strategy, new products, new hires -- to get revenue flowing. Frankly, I am sick of the idea that we all need to wait around for some sort of political salvation to make this happen. The small-business community needs to embrace the sense of American ingenuity and innovation that inspired them to choose the small-business path in the first place.

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Heather Clancy is an award-winning business journalist with a passion for small businesses, green technology and corporate sustainability issues. Her articles have appeared in Entrepreneur, Fortune Small Business, The International Herald Tribune and The New York Times. Follow her on Twitter.