The Discover® Small Business Watch(SM) rose to 107.7 in September as small business owners expressed increased confidence in the U.S. economy. The advance from last month’s inaugural baseline Watch of 100.0 reflects higher ratings for the U.S. economy, an improved outlook for business over the next six months, and a drop in the number of owners who say economic conditions in the country are getting worse.


The Discover Small Business Watch is an index of the economic confidence of the nation’s 22 million small businesses with five or fewer employees. The Watch, published by Discover Business Card each month, is based on random surveys of 1,000 small business owners and is intended to give a voice to this critical, trillion-dollar sector of the U.S. economy.


Driving the September 2006 Small Business Watch improvement:

  • Forty-three percent of small business owners said economic conditions for their businesses will improve over the next six months, up from 35 percent last month.
  • Forty-four percent of small business owners rated the current state of the economy as “Excellent” or “Good,” up from 39 percent in August.
  • Fifty-one percent of small business owners believe economic conditions in the country are getting worse, down from 61 percent in August.


The increased optimism was somewhat offset by cautious attitudes with respect to hiring and investment. In the September survey, only 11 percent of small businesses said they planned on hiring more workers, down from 15 percent in August, while ten percent said they planned to lay off some workers compared to seven percent in August. The number of companies planning to reduce new business spending was up from 38 percent from 34 percent.


“Clearly small businesses are more optimistic about the economy, but this has not yet translated into workforce expansion or more robust spending on business development at this point in time,” said Sastry Rachakonda, Director, Discover Business Card. “Although we have seen signs of some positive economic trends currently in the news, such as falling energy prices, small business owners are still cautious, especially given the slowdown of the housing market. One in three (32 percent) small business owners feels their business would be significantly impacted if the housing market slows down.”


Small Business Spotlight on Real Estate Reflects New Challenges for Realtors


In addition to generating the Index and surveying small business viewpoints on key business drivers, the Small Business Watch also surveys consumer attitudes towards different segments of the small business economy. The September 2006 survey takes an in-depth look at issues related to real estate and realtors.


Survey data from consumers and small business owners helps confirm the current slowdown in the housing market. A clear majority (68 percent) feel the real estate market is slowing down based on the length of time houses are on the market in their area. Furthermore, a majority of respondents (58 percent) are not likely to buy a new home for five or more years, while only 11 percent were likely to buy a home within the next six months to a year.


The survey shows real estate overwhelmingly is a relationship-based business. When asked about the most important considerations when selecting an agent, nearly half of the respondents (47 percent) said they would choose someone they “know and trust” to sell their home over other qualities, including a realtor’s sales record (16 percent) and a referral (11 percent). Additionally, a clear majority of consumers (57 percent) said finding buyers is the most important service a real estate agent could provide, while only 6 percent thought it was setting the asking price. Ninety-one percent of the customers were very confident or somewhat confident they know the value of their home.


Rachakonda continued: “These results help confirm that realtors face tremendous challenges. While real estate is clearly a relationship-driven business, given the slowdown in the housing market and the ubiquity of online services, this is an industry that seems to be under a lot of pressure right now and in the throes of enormous change.”


Buyers and sellers of real estate share different perspectives when deciding between realtors and online real estate services, according to the survey:

  • Sixty-one percent of sellers indicated they would prefer to use an agent to sell their home, versus four percent who would use on online service.
  • On the other hand, only 49 percent of buyers said they would use a real estate agent for their home search, while 22 percent would rather use on online service.


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