Discover® Small Business WatchSM: Confidence among Small Business Owners Rebounds in January

Discover on Payments MarketIndex Rises to Highest Point in Three Years

RIVERWOODS, Ill., (PaymentsMarket) -- After falling in December, confidence among small business owners rebounded in January as more see the economy and economic conditions for their businesses improving, according to the Discover® Small Business WatchSM. The monthly index rose to 91.0 this month, up 9.4 points from December 2010 and 5.5 points higher than one year ago, the highest the index has been since December 2007 when it stood at 92.7.

Thirty-one percent of small business owners say the economy is getting better this month, up from 25 percent in December; 41 percent say it is getting worse, down from 51 percent last month; 24 percent say it's the same, up from 22 percent; 3 percent were unsure.

Small business owners' views of economic conditions for their businesses in the next six months are also improving. Thirty-one percent of small business owners say economic conditions for their businesses are getting better, up from 25 percent the month prior; 38 percent see conditions getting worse, down from 43 percent in December; 26 percent say they are the same, even with December; 5 percent were unsure.

"A cautious optimism among small business owners has emerged over the last five months with the index rising 18 points during this time period," said Ryan Scully, director of Discover's business card. "'Cautious' should be emphasized though, as over half of those business owners surveyed still rate the economy as poor. It's too early to call this current rise in confidence a distinct trend, but confidence is steadily improving."

January Confidence Indicators

  • 30 percent of small business owners said they will increase spending on business development such as advertising, inventories and capital expenditures in the next six months, jumping 9 points to its highest point since March 2008. Forty percent will decrease business development spending, down from 42 percent last month; 27 percent do not plan any changes, down from 32 percent.
  • 57 percent of small business owners are reporting the economy as "poor", down 5 points from last month. More small business owners report the economy as "fair", up 4 points to 34 percent, and those who rate the economy as "good" is up 2 points to 7 percent. Just 2 percent report the economy as "excellent", down from 3 percent last month.
  • 43 percent have encountered temporary cash flow issues within the last 90 days that have impacted their ability to pay bills on time, down from 45 percent last month, while 49 percent still are not encountering cash flow issues, flat with last month; 8 percent were not sure.

Health Care Poll: 55% of Small Business Owners Favor Repeal of Health Care Reform Law

Fifty-five percent of small business owners favor the repeal of the health care reform law passed by Congress and signed into law by President Obama last year. Thirty-six percent of small business owners oppose the repeal and 9 percent are unsure.

At its highest point since Discover began the Small Business Watch four years ago, 47 percent of small business owners who provide health insurance to their employees say they are considering discontinuing health insurance because the costs are too high. Fifty-one percent of small business owners who offer health insurance to their employees say they are not considering discontinuing the insurance, and 2 percent are unsure.

Additional Health Care Sentiment Points

  • While 46 percent say the new health care reform will hurt their small business, 27 percent say the new plan will help, 16 percent say it will have no impact, and 11 percent are not sure.
  • 38 percent of small business owners report health care costs having a major impact on their ability to grow business. Twenty-one percent report a minor impact, 32 percent report no impact and 8 percent are not sure.
  • 70 percent of small businesses owners report it is at least somewhat difficult to obtain affordable health care for themselves and employees. Just 11 percent say it is "not very" difficult, while 5 percent report no difficulty and 15 percent are 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 (www.rasmussenreports.com), an independent survey research firm. The numeric index is calculated by assigning values to responses to a set of five 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 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 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.

SOURCE: Discover Financial Services
Discover Financial Services

Matt Towson
224-405-5649
matthewtowson@discover.com
or
Burson-Marsteller
Jessica Douglas
312-596-3441
jessica.douglas@bm.com