Small businesses show reluctance on long-term investment

Small businesses show reluctance on long-term investment

Small business owners are sharply rolling back their intentions to make long-term investments, according to new data from Gallup and Wells Fargo.

The two groups’ small business index found that about one in five owners plan to increase capital spending over the next year, while around one in three plan to reduce investments.

That finding comes along with broader concerns and pessimism about the direction of the economy.

“Capital spending is by its nature relatively long-term,” wrote Dennis Jacobe, Gallup’s chief economist. “As a result, capital spending plans tend to be something business owners can defer when operating conditions are difficult.”

The findings come the same week that the National Federation of Independent Business found plummeting optimism among small business owners.

Ben Bernanke, the Federal Reserve chairman, cited that small business pessimism in commenting this week that concerns over the politics of the “fiscal cliff” were already having an effect on the economy.

Small businesses, according to Gallup and Wells Fargo, had been more likely than not to increase investments in the years leading up to the 2008 fiscal crisis.

Plans to invest had been making a comeback this year, before falling in recent months.

Source: The Hill