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Discover Small Business Watch Reveals Decline in Economic Confidence





Riverwoods, Illinois (PRESS RELEASE – December 28, 2010) -Three months of rising confidence among small business owners stalled in December, as fewer see economy getting better and more see it getting worse, according to the Discover Small Business Watch. The monthly index dropped to 81.6 in December, down 5.6 points from November. The index remains 4.6 points higher than one year ago.

“Through the four years we’ve been studying them; small business owners have remained a bit fickle when it comes to their confidence in the economy”

Twenty-five percent of small business owners said the economy is getting better this month, down from 33 percent in November; 51 percent said it is getting worse, up from 46 percent; and 22 percent said the economy is staying the same, up from 17 percent the prior month.

“Through the four years we’ve been studying them, small business owners have remained a bit fickle when it comes to their confidence in the economy,” said Ryan Scully, director of Discover’s business card. “Like the rest of us, they’re seeing some positive signs, but they aren’t ready to declare victory, especially not with 62 percent of them still rating the economy as poor.”

Other Confidence Indicators

  • 25 percent of small business owners expect economic conditions for their businesses to improve in the first half of 2011, a drop from 28 percent a month ago; 26 percent expect conditions to remain the same, up from 24 percent; and 43 percent expect conditions to worsen, down from 44 percent in November.
  • 21 percent of small business owners will increase spending on business development in the next 6 months, down from 25 percent in November. 42 percent will decrease business development spending, up from 40 percent; and 32 percent do not plan any changes, up from 28 percent last month.
  • 62 percent rate the current economy as poor, up from 59 percent in November; 30 percent rate the economy fair; 5 percent rate it good; and 3 percent rate it excellent.
  • 45 percent have encountered temporary cash flow issues within the last 90 days that have caused them to hold off on paying some bills, up from 43 percent in November, while 49 percent have not had cash flow issues; and 6 percent were not sure.

Financial Planning Poll: Retirement Planning Slows

The number of small business owners who have a financial plan for retirement is down from a year earlier, when the Watch first surveyed small business owners on the topic. This year, 50 percent of small business owners said they have a financial plan for their retirement, down from 62 percent in 2009.

At the same time, the recession has depleted the savings of 74 percent of small business owners, the same number as last year, while 20 percent said the recession had no impact, and 5 percent saw their retirement savings increase.

When asked how much their retirement savings they had lost, fewer small business owners than last year reported that they had lost between 30 and 50 percent of their savings.

Asked of those small business owners who said their retirement savings had decreased:
How much did the recession decrease your retirement savings?
2009 2010
A decrease of up to 10 percent 12% 17%
A decrease of 10 to 20 percent 24% 17%
A decrease of 20 to 30 percent 17% 24%
A decrease of 30 to 50 percent 24% 18%
A decrease of more than 50 percent 19% 20%
Not sure 5% 5%

When asked how likely is it that they will have enough resources to last through retirement, 56 percent indicated it was somewhat or very likely, down 63 percent from last year.

How likely is it that you will have enough resources to last through your retirement?
2009 2010
Very likely 24% 24%
Somewhat likely 39% 32%
Not very likely 25% 24%
Not at all likely 7% 11%
Not sure 4% 9%

Fewer Planning to Retire

More small business owners are putting the brakes on retirement. When asked if they plan to retire by a certain age, 38 percent of small business owners said they do not plan to retire, up from 30 percent a year ago.

When asked “Do you plan to retire before age 60, between ages 60 and 65, between 65 and 70 or do you plan to retire after age 70?” US small business owners say they:
2009 2010
Do not plan to retire 30% 38%
Plan to retire before age 60 13% 14%
Plan to retire between ages 60 and 65 28% 21%
Plan to retire between ages 65 and 70 18% 19%
Plan to retire after age 70 9% 8%
Not sure 3% 1%

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, 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.

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.

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Marie Hernan



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