Small Business Economy Still Struggling

We've been surprised by resiliency of the U.S. and global economies.  Despite a series of strong shocks (oil prices, unrest in the middle east, rising commodity prices, etc.), a recent survey of economists by USA Today shows they still think the recovery is continuing and the U.S. economy will grow moderately in 2011. 

But as the Business Week article A Tale of Two Recoveries points out, small businesses have grown more pessimistic about the economy over the past few months.  Key quote:

"While small business sentiment had registered broadly improvement during the second half of 2010, the most recent polls of business owners by Wells Fargo/Gallup, Discover/Rasmussen, and the National Federation of Independent Business show that expectations for recovery have deteriorated."

While small business owners have become more pessimistic, managers at large corporations continue to be upbeat about their prospects. 

It appears they have good reasons.  Wall Street continues to forecast double digit earnings growth at S&P 500 companies in 2011, which is a key reason why stock prices are at their highest level since before the Great Recession. 

As we pointed out last year in our post The Two Speed Economy - Big Versus Small Business , large corporations are benefiting from their exposure to stronger international markets and better access to credit.  They also continue to raise productivity through cost cutting and automation. 

Without access to faster growing markets in the developing world, small businesses continue to struggle with a lack of demand.  Another key quote from the BW article on the results of a recent NFIB small business survey:

Companies listed "poor sales" as their most important problem, an issue that has consistently scored highest since the recession struck.

We continue to believe the small business economy is recovering.  But our optimism is tempered by concerns over rising energy costs and inflation in general. 

Comments

[vanessa]

While small business sentiment had registered broadly improvement during the second half of 2010, the most recent polls of business owners by Wells Fargo/Gallup, Discover/Rasmussen, and the National Federation of Independent Business show that expectations for recovery have deteriorated.
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