Small business owners have grown increasingly optimistic about economic conditions over the past several months, but will they act on it by investing more capital into their companies?
More than one out of four small employers (28 percent) plan to increase the amount of money their firm allocates for long-term investments like machinery and computers in the coming year, marking the highest level since 2008, according to new data collected by Wells Fargo and Gallup. The portion expecting to increase capital investments also eclipsed the portion expecting to decrease those investments (23 percent) for the first time in four years.
Small business spending has already started to head in that direction, according to the poll, which shows that 24 percent of business owners already increased capital spending in the past year – again, reaching the highest mark since mid-2008. That can largely be attributed to improving perceptions of the economic recovery and easing credit markets, according to Gallup Chief Economist Dennis Jacobe.
“While small-business owners’ overall optimism may be the driving force behind their increased capital spending intentions, their credit expectations may also play a role in those decisions,” he wrote in a statement. “Although it may still be difficult for many small-business owners to get credit, their views of doing so have improved in comparison with the past few years.
Indeed, the proportion of small business owners who believe credit will become easier to get this year hit 27 percent in the most recent poll, reaching its highest level since 2009.
However, Jacobe pointed out that it remains to be seen whether small business owners will actually fulfill their plans to increase capital investments, as optimism levels still lag well behind those reported prior to the recession. He also warned that rising gas prices could prove especially detrimental to consumer spending and place an additional financial burden on many companies, which could in turn diminish the amount of capital business owners are willing or able to invest back into their firms.
Wells Fargo and Gallup surveyed 600 small business owners in all 50 states last month for the index, the results of which have a margin of error of +/- 4 percentage points.