Small business owners in the U.S. are the most optimistic they've been in 11 years about their prospects for 2018, according to a new Wells Fargo/Gallup Small Business Index Survey.

The quarterly survey, which measures the attitudes of small business owners, shows that they are bullish on the coming year and expect revenues to hit record highs.

The highest index rating in recent years came in the fourth quarter of 2006, when the optimism of business owners measured 114.

By contrast, the index plummeted to -28 in the third quarter of 2010 after the recession.

This current index is at 107 for the first quarter of 2018, an 11-year high and an increase from the 103 index measured in the last quarter of 2017.

Owners rate the current situation of their businesses, and their expectations for the next 12 months.

The index measures their overall financial situation, including revenue, cash flow, capital spending, number of jobs, and the ease of getting credit.

Optimism Matches Pre-Recession Levels

"Owners' rating of their future financial situation now matches levels from December 2007, when the index was at its highest point," according to Gallup.

"But owners now remain somewhat less positive about their current financial situation than was the case then, helping explain why the index remains slightly below the all-time high."

The index rose sharply in late 2016 after the November presidential elections and has remained high since, exceeding 100 in each of the last three quarters, Gallup said.

The latest survey was conducted Jan. 3-9.

Two-thirds of small business owners expect their revenues to increase in the next 12 months.
The expanding national economy is also fueling optimism, said Wells Fargo senior economist Mark Vitner.

"Many small business owners believe that strong momentum will carry over to 2018," Vitner said.

The national economy grew 2.6% for the fourth quarter of 2017, and 2.3% for the entire year. It's expected to expand this year by around 3% or more.

Key Factors

Other forces bolstering the optimism include:

  • A majority of owners (52%) say their revenues increased a little or a lot in the last 12 months, higher than any point since 2007, and two-thirds (66%) expect their revenues to increase in the next 12 months.
  • Cash flow. Three-fourths (77%) of business owners expect their cash flow will be very good or somewhat good over the next 12 months, up from 73% in November 2017 and the highest reading of this measure in the survey's history.
  • Capital spending. Thirty-eight percent expect the amount of money their business allocates for capital spending to increase a little or a lot over the next 12 months, compared to 33% in November 2017. It’s the highest this measure has been since December 2003, when it was also 38%.
  • Obtaining credit. Forty-six percent expect credit will be very easy or somewhat easy to obtain, compared to 45% in November 2017.
  • Continue hiring. One-third (33%) of business owners expect the number of jobs at their company to increase in the next 12 months, up 1% from November 2017.

But the survey found that one in four business owners cite issues relating to government and government policies as their top challenges.