Small business owner optimism continues on a three quarter downward trend, according to the recent Wells Fargo/Gallup Small Business Index (Index) survey conducted in January. The Index score fell to 83, the second-lowest level since the survey's inception in August 2003, when the score was 69.

This was a 16-point drop from the previous survey in October 2007, and a 31-point total drop from the Index's highest score of 114 in December 2006. The 16-point drop is the Index's largest quarterly decrease to date. The Index score is the sum of both current and future expectations for six key measures: financial situation, cash flow, revenues, capital allocation, job hiring, and credit availability.

"Small business optimism is eroding along with the economic and financial outlook," said Dr. Scott Anderson, Wells Fargo senior economist. "The year began with an environment of inflation, rising unemployment, and reduced business activity. Stock prices plunged during the first two weeks of January, and many retailers reported sales below expectations. During the period the survey was conducted, the economic and financial conditions likely weighed on small business owner sentiment."

Despite the drop in overall optimism, survey respondents said they are satisfied being small business owners (90 percent). Satisfaction levels were almost unchanged from October. Eighty-five percent reported that if "they could do it all over again," they would still become small business owners; in October, 83 percent reported the same.

Small business owners' future expectations for the next 12 months fell 12 points to 45, the lowest score on record, and a 20-point drop from the survey's highest score of 65 in December 2006. Small business owners' ratings of their current situation decreased four points from 42 in October to 38, the third lowest score on record. Each of the six key measures in the Index score reflected a drop from the previous quarter.