Latest Wells Fargo/Gallup Index: Small business owner optimism remains low;
outlook for capital spending and revenue improves

Optimism among small business owners showed no significant change in January, despite
improved business owner outlook for revenue, capital spending and cash flow, according
to the latest results of the quarterly Wells Fargo/Gallup Small Business Index.

Concluded January 22, the latest Wells Fargo/Gallup Small Business Index optimism score
came in at negative 16 (-16), a one-point decrease from the previous survey (conducted
in October 2009), and 130 points lower than the Index high of 114 (conducted December
2006). A score of zero indicates that small business owners, as a group, are neutral
 -- neither optimistic nor pessimistic -- about their companies’ situations.

The Index is the sum of “present situation” and “future expectations” of small business owners
for six key measures, including financial situation, cash flow, revenues, capital allocation spending,
job hiring and credit availability. The “present situation” score decreased slightly, down five points
to negative 29 (-29), the lowest present situation score in the history of the Index. “Future expectations”
increased four points, from nine to 13.

Index Score: Q1 2010 vs. Q4 2009  

                                                    Overall Index
                                                    Small Business
                                                    Owner Optimism     Present Situation      Future Expectations
Q1 2010
(surveyed January 2010)                        -16                            -29                                13 
Q4 2009
(surveyed October 2009)                        -15                            -24                                19 

Of the six key measures, the following measures served as main drivers of the Index score
during this survey:

Present Situation:
Cash Flow – 42 percent rated their cash flow as somewhat poor or very poor for the past
12 months, up from 36 percent in Q409

Future Expectations:
Revenues – 48 percent expect revenue increases over the next 12 months, up from 42
percent in Q409
Capital Spending Allocations – 24 percent expect spending to increase in the next 12
months, up from 19 percent in Q409.
 
About the Small Business Index
For the last 27 quarters, the Wells Fargo/Gallup Small Business Index has surveyed small
business owners on current and future perceptions of their business financial situation. The
Index consists of two dimensions: 1) Owners’ ratings of the current situation of their businesses
and, 2) Owners’ ratings of how they expect their businesses to perform over the next 12 months.
An Index score of zero indicates that small business owners, as a group, are neutral -- neither
optimistic nor pessimistic -- about their companies’ situations. Results are based on telephone
interviews with 605 small business owners in the continental United States conducted January
18–22, 2010. The overall Small Business Index is computed from a formula that scores and sums
the answers to 12 questions— six about the present situation and six about the future. The overall
Index can range from -400 (the most negative score possible) to +400 (the most positive score
possible), but in practice takes on a much more limited range. The margin of sampling error is +/-
four percentage points.