Optimism Small Business Optimism Rises

A majority of the nation's small business owners are more bullish about business conditions this year, with a larger number of those owners calling current conditions excellent or good, according to the latest Citibank survey. According to the survey, a large majority of small business owners expect 2011 will be better than or the same as last year, with only 15 percent expecting it will be worse. The latest survey shows an increase in entrepreneurs' optimism about both current and future business conditions, which Citibank says offers a strong indication that after battling through the recession, small businesses are finally poised for growth.

"Small businesses are one of the main engines for economic growth and job creation, and their increasing optimism as we enter 2011 represents an incredibly positive development," said Raj Seshadri, the head of small-business banking at Citibank, the retail banking arm of Citigroup Inc.

Seshadri told Dow Jones Newswires that optimism from business owners was typically the first step to a recovery. She said their optimism is similar to what is being seen in other aspects of the market.

The rosier outlook, however, didn't lead to a better hiring environment, as 78 percent of small business owners said they plan to keep the same number of employees over the next 12 months, while only 14 percent say they will increase their employee count.

Seshadri said as sales pick up, small business owners will start investing in growth initiatives and hiring, although when that will happen is hard to predict, as many remain cautious about the recovery and higher prices. Still, it was a positive sign that many employers expect to maintain a stable employee count.

Earlier this week, a Wall Street Journal survey found economists expect the unemployment rate will end the year at 8.6 percent--below January's 9 percent, but still extremely high. The economy faces a number of challenges, including a high foreclosure rate, rising commodity prices, strained state and local governments and the impact of financial woes stressing European nations.

Meanwhile, a majority of those surveyed by Citibank also expressed concerns about the rising cost of running their business. Those fears include expectations of higher utility costs, raw materials, taxes, the cost of health care and the cost to borrow. Business owners said higher raw material costs and the increased cost of health care pose the biggest challenges this year.

Still, the survey found that 55 percent of business owners don't expect to raise the prices they charge this year. Seshadri told Dow Jones that while the cost of running a business is going up, owners are cautious about raising prices as demand just begins to recover.