Results for the Bank of America/ CFI Group Small Business Forecast show a surge in optimism about the economy.
As a longtime leader in the financial services industry and a prominent supporter of small businesses, Bank of America has consistently endeavored to provide thought leadership in support of these key engines of growth in the American economy. Early in 2014, Bank of America set out to develop an index of small business owner sentiment which would serve as a leading indicator of business activity in this sector, with the goals of providing insight to the macro economy and support for its own efforts to better serve small business customers. To this end, Bank of America has partnered with CFI Group, an international leader in the development of customer analytics and their linkage to macro- and micro-level measurements of economic performance. Together we developed the Bank of America/CFI Group Small Business Forecast—a set of metrics drawn from a national survey of small business owners and managers, tied together in a forward-looking analytical framework that provides insights not only into these business owner’s viewpoints today, but how those views and attitudes will shape their expectations and business planning in the near term. The baseline wave of the Small Business Forecast was conducted in August of 2014.
The second wave of the Small Business Forecast study took place in January of 2015, and this article provides a brief overview of the results, with a particular focus on the shifts in small business owners’ and mangers’ views that occurred since the inaugural wave of the survey. Additional iterations of this study are planned on an ongoing, semi-annual basis.
The core of the Small Business Forecast survey is a series of items which ask respondents to provide their assessments of multiple factors impacting health of small businesses, their own feelings of life satisfaction and optimism, and their expectations for growing their business over the following twelve months. These measures and the relationships among them are found in the Small Business Sentiment Model.
The most striking findings from the second wave of the Small Business Forecast survey can be found at the top of Table 2 and shows a profoundly positive shift in respondents’ assessments of the strength of the economy and the financial environment for small businesses. It is likely that much of this shift is attributable to the abundance of positive stories appearing in the media in roughly the same timeframe as the survey fielding, which trumpeted improvements in the performance of the U.S. economy as 2014 drew to a close (along with upward revisions of key economic indicators from earlier in the fall of 2014). The 15% improvement in respondents’ ratings of the Strength of the U.S. Economy in particular suggests that our respondents welcomed this news eagerly.
SMALL BUSINESS SENTIMENT MODEL
A key driver analysis of the factors included in our Small Business Sentiment Model using the January data continue to show the State of the Economy for your business and Life Satisfaction to be the highest-leverage factors impacting respondents’ Optimism and Growth expectations, in roughly equal measure. These two factors represent the areas of greatest sensitivity for our respondents in that any score changes are predicted to have a substantial and immediate effect upon Optimism and Growth. And, in fact, the modest but statistically significant two-point improvement in respondents’ assessments of their likelihood to see and to drive growth in their business over the next year is of the magnitude that the key driver analysis would lead us to expect given the observed changes in the model factors scores, further validating the predictive utility of our research approach.
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