Mood Edges Upward for Small Business

Small-business owners' confidence in the state of the U.S. economy inched upward again this month after setting a record low in June, according to Discover Financial Services.

The Riverwoods, Ill., credit card company said Monday that its Small Business Watch index rose 2.3 points, to 86.9. The reading in June was 71.8, the lowest since the index was introduced in 2006 and pegged at 100. Last month the index rose 12.8 points.

Sixty percent of small-business owners said this month that they think the U.S. economy is getting worse, down from 71% last month, and 23% said they think it is improving, the biggest share to see improvement since August 2007.

About 51% rated economic conditions as poor, compared to 54% in July; 15% rated conditions as good, up from last month's 11%.

Despite this optimism at the macro level, many small businesses are having problems at the micro level. Forty-two percent of respondents said they had experienced cash-flow issues in the past 90 days, up significantly from the 33% who said so in July.

Thirty percent said they think economic conditions for their businesses are getting better, compared to 28% who said so last month, but 44% said conditions are getting worse, up from 43% last month.

"We saw an increase in their confidence in the direction of the overall economy, but that was offset by more owners saying they're having cash-flow issues," Ryan Scully, Discover's director of business credit cards, said in a press release. "Their perceptions of the conditions for their own businesses were flat, making this gain harder to pin down. There is still a great amount of caution out there."

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