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WASHINGTON, D.C. -- Small-business owners' optimism continues to edge up in 2019. In the latest quarterly Wells Fargo/ÓÅÃÛ´«Ã½Small Business Index survey, conducted Sept. 30-Oct. 4, the overall index is at +142, up from +136 in July and +129 in April. The index is a measure of owners' present and future optimism -- both of which saw modest upticks this quarter.

The Small Business Index measures small-business owners' attitudes about a wide variety of factors affecting their business. The rise in the overall score this quarter is driven by modest improvements across most of the index items, rather than a significant improvement on any single dimension.

Additionally, when owners are asked a broad question about their financial outlook "for your business" over the next year, 77% say they are more optimistic than pessimistic -- similar to the 79% recorded last quarter and up modestly from 70% in Quarter 2.

Although small-business owners remain very optimistic, their confidence in the overall economy, while still strong, has shown some signs of erosion. Sixty-three percent say the current state of the U.S. economy is excellent or good. This is down somewhat from 70% in July's Quarter 3 poll but on par with Quarter 2, when 63% rated the economy as excellent or good.

	2019 Qtr 2 (Apr)	2019 Qtr 3 (Jul)	2019 Qtr 4 (Sep-Oct)
	%	%	%
Excellent	15	20	22
Good	48	50	41
Fair	31	25	30
Poor	6	5	7
Wells Fargo/Gallup

Of note this quarter is a new question asking owners about the possibility of a recession in the year ahead. Currently, one-third of small-business owners (33%) anticipate an economic downturn or recession in the next 12 months, while another 34% say it is somewhat likely and 27% say it's not very likely.

Owners clearly understand that their business success is tied to a strong U.S. economy -- with a third (34%) saying the overall economic environment in the U.S. affects their business a great deal and 50% saying it affects them some.

At the same time, a significant majority of small-business owners (75%) feel they have the right strategy to handle future changes in economic conditions. And 86% report that they are either very prepared (24%) or somewhat prepared (62%) to handle "an economic downturn that might occur over the next several years."

2020 Presidential Campaign

Although Election Day 2020 was still over a year away at the time of this survey, campaigning -- particularly the fight for the Democratic presidential nomination -- has been underway for many months. Thus far in the campaign, small-business owners believe that the presidential candidates are not paying enough attention to small-business needs, with 69% saying that the candidates are not discussing the issues most important to them as small-business owners. And 51% say that the outcome of the presidential election will have a major impact on their business.

	2019 Qtr 4 (Sep-Oct)
	%
Yes	31
No	69
Wells Fargo/Gallup

In an open-ended question, small-business owners were asked to name the most important issue on which they would like the presidential candidates to focus during the campaign. Owners named a variety of issues, but the three most frequently mentioned were taxes/tax relief, healthcare/insurance and the overall economy. Other issues named by 5% or more of small-business owners included trade tariffs, general issues related to small businesses, and the need for "less socialism and government rhetoric."

	2019 Qtr 4 (Sep-Oct)
	%
Taxes/fair taxation/tax relief	21
Healthcare/insurance/affordable healthcare	11
Economy	10
Trade (import and export) tariffs	7
Small business focus	5
Less socialism/government rhetoric	5
Immigration	4
National debts/spending	4
Jobs/employment/job training	3
Government regulations/stability/government reform	3
Getting Trump out/impeachment	3
Restore honesty/integrity	3
Climate change/environmental issues	3
Government unity	2
National security/terrorism/military spending	2
Wages/income equality	1
City infrastructure/education/housing	1
Affordable credit/interest rates	1
Social Security/aging population	1
Care more about U.S. first/U.S. citizens	1
Crime/guns and violence	1
Welfare reform	1
Financial stability/sustainability	1
Equal rights/justice	1
Wells Fargo/Gallup

When asked specifically to rate the importance of a number of issues that the winner of the 2020 presidential election should address when they take office, small-business owners were most likely to rate "economic policies that affect small-business owners" as extremely or very important, followed by tax code changes/tax regulations/tax rates, increasing consumer confidence in the economy, and healthcare. Owners were least likely to mention increasing the minimum wage, the Small Business Administration, environmental regulations/climate change, and government regulation of banks as important issues for the 2020 winner to address.

Challenges Facing Small-Business Owners

Owners continue to be most likely to cite "attracting customers/finding new business" as the top challenge facing their business, in line with most recent surveys. This quarter, competition from other larger companies and online retailers was the challenge next most likely to be cited, followed by hiring and the difficulty associated with being self-employed.

Bottom Line

Small-business owners remain upbeat about their company's financial outlook. While a majority rate the national economy as excellent or good, there is some anxiety over the potential for an economic downturn or recession in the next 12 months. These owners understand that their fortunes are tied to the current state of the U.S. economy, although most feel at least somewhat prepared to handle a recession should it come.

Small-business owners recognize that the outcome of the 2020 presidential election will have a major impact on their business -- but so far, only about three in 10 believe the candidates are discussing the issues important to them, which appear to be the economy, taxes and healthcare.

For more information about Wells Fargo Works for Small Business, visit . Follow us on Twitter @WellsFargoWorks.

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