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Discover® Small Business WatchSM: Small Business Economic Confidence Plunges to Lowest Level in Nine Months

Cash Flow Concerns Increase, Economic Conditions Worsen

EXPECTATIONS ARE LOW FOR THE HOLIDAYS

46% of Small Business Owners Expect Lower Sales Over 2008

RIVERWOODS, Ill.--(BUSINESS WIRE)--Nov. 30, 2009-- Economic confidence among America’s small business owners plummeted in November, as more owners cited serious concerns about cash flow and saw economic conditions for their own businesses getting worse. The Discover® Small Business WatchSM index fell 12 points in November to 76.5 from 88.5 in October.

“Fading confidence among small business owners could be tied to their low expectations for the upcoming holiday season, as 46 percent are forecasting decreased sales and 39 percent are expecting to hold the line,” said Ryan Scully, director of Discover's business credit card. “However, we saw drops in optimism across the board, so it’s hardly just one factor causing the concern.”

The mood of small business owners generally has soured in November for three straight years, as economic confidence dropped from October to November in 2007 and 2008. The November 2008 index of 67.5 is the low point for the Watch since it started in August 2006.

November Highlights:

  • 52 percent of owners say they have experienced cash flow issues in the past 90 days, up from 44 percent in October. Forty-one percent of owners say they have not experienced cash flow issues, which is the lowest response in this category since the Watch began. The remaining 6 percent said they weren’t sure.
  • 53 percent of small business owners see conditions getting worse in the next six months, up from 43 percent in October; while 19 percent report that conditions are improving, a sharp decline from 29 percent in October; 23 percent see conditions as the same, and 5 percent weren’t sure.
  • 62 percent of small business owners rate the economy as poor, an increase from 55 percent in October; 30 percent rate it as fair, and 8 percent say it is good or excellent.
  • 53 percent of small business owners think the overall economy is getting worse, up from 44 percent in October but still significantly lower than the 69 percent of owners who felt that way in February 2009, the last time the Watch index was this low. For November; 28 percent say the economy is getting better, down from 35 percent in October; 16 percent see it staying the same, and 3 percent are not sure.

Only 11 percent of Small Businesses Expecting Increased Sales This Year

Small business owners have a glum outlook on the holiday season: Only 11 percent expect to see more business this year over last, while 46 percent of them are expecting less business than last year, an increase over the 40 percent who said the same in November 2008; 39 percent anticipate 2009 sales will be about the same as last year, and 4 percent weren’t sure.

For many small business owners, the holiday season is not necessarily their busiest time. A majority of owners, 56 percent, say that the holiday season falls somewhere in between being their busiest and the slowest time of year, 29 percent say this is their slowest time, and 13 percent say it is the busiest.

Discount Department Stores Still Most Popular for Holiday Shopping

This month the Watch also polled 3,000 consumers on issues important to small businesses. When asked to choose from a list of places where they expect to do most of their holiday shopping, they chose the following:

  • Discount department stores, 30 percent
  • Department stores, 18 percent
  • Warehouse and club stores, 7 percent
  • Small retail and specialty stores, 7 percent
  • Electronics retailers, 5 percent
  • Some other type of store, 9 percent
  • Not sure, 23 percent

These shopping-preference percentages were little changed from what they were in 2008.

When it comes to the Internet, 57 percent of consumers said that they will do at least some of their shopping online this year.

Squeeze on Credit

Twenty-four percent of small business owners say that they extend credit to customers, and 73 percent of those that extend credit say that they have customers who have delayed or asked to delay a payment in the last three months. This is largely unchanged from December 2008 when 25 percent said they were extending credit, and 72 percent said that they had customers who delayed or asked to delay a payment.

Helping Out the Little Guy

What would you do if that convenient corner market or neighborhood hardware store near you suddenly closed? Did you ever consciously make a point to use a small business in the hope that your patronage would help keep it open? If so, you’re in good company – 68 percent of consumers say that they have made purchases at a small business in an effort to keep it from closing.

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.

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 six 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 leading credit card issuer and electronic 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 student and personal loans, as well as savings products such as certificates of deposit and money market accounts. Its payments 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 185 countries and territories. For more information, visit www.discoverfinancial.com.

Source: Discover Financial Services

Discover Financial Services
Jon Drummond, 224-405-1888
jondrummond@discover.com
or
Robinson Lerer & Montgomery
Amanda Bonzo, 646-805-2060
abonzo@rlmnet.com