Small-business owners’ confidence in the overall economy is
fading despite strength in their own operations, a sign the recovery’s gains
may be slowing. For August, the portion of small businesses reporting that the
U.S. economy was improving fell to its lowest level since the government
shutdown of 2013, according to a monthly survey of small firms by The Wall
Street Journal and Vistage International Inc. The survey was completed in
mid-August, before concerns about an economic slowdown in China triggered a
selloff across global markets.
Tim Touchette, president of Attache Corporate Housing, which
rents furnished accommodations to corporate and government clients, says his
concerns began growing after more of his corporate clients began booking
shorter stays. Unsure what is driving the change, Mr. Touchette worries that it
could become a drag on revenue growth at his 10-person company, based in
Washington, D.C.
Confidence in the U.S. economy among small-business
owners has been declining for much of this year. In the most recent
WSJ/Vistage survey, only 42% of the 682 small companies surveyed said economic
conditions were better than a year ago, down from 47% in July and a January
peak of 67%. But small-business owners’ waning optimism about the larger
economy belies their outlook for their own operations. Fifty-seven percent of
small firms surveyed expect their total number of employees to increase over
the next 12 months, while 46% forecast growth in investment spending. Nearly
three-quarters expect higher revenue over the next 12 months and 57% forecast
profitability to rise.
Alyssa Connell, founder of marketing firm Connell Aviation
Group Inc., fits the bill. Basing her view of the economy in part on the
business plans of her clients that include small-town airports, avionics
companies and others in aviation and aerospace industries, Ms. Connell said she
expects the next year to be one of slow growth.
Luis Alvarez, president of Alvarez Technology Group
Inc., a Salinas, Calif., information technology services firm with 38 employees
that serves small and midsize companies, said he recently added two new
employees and forecasts revenue to be up 15% this year, based on the firm’s
performance in the first half of 2015. His clients’ spending plans for the next
18 to 24 months have fueled his optimism.
Small businesses are riding renewed strength in the U.S.
economy after being battered during the recession when consumer spending fell,
home prices declined and banks pulled back on lending. More jobs, improving
consumer confidence and rebounding housing prices have helped “support a
revival of small businesses,” said Mark Zandi, chief economist of Moody’s
Analytics.
Some business owners say their businesses are strong but
troubles rippling through the global economy could yet hit their operations.
Peter Argondizzo, founder of Argo Translation Inc., a Glenview, Ill., firm with
eight employees, says that about one-quarter of his business is from
translating materials for U.S. companies’ Chinese operations. Mr. Argondizzo this year hired an additional salesperson
and project manager and has one more position he is seeking to fill.
But the economic rebound is still shaky. The decline in oil
prices has taken the steam out of a pocket of growth in the overall economy,
with firms that benefited from the energy boom laying off workers and cutting
back on spending. And while unemployment is improving, wage growth is tepid,
something that economists say has constrained consumer spending growth.
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