Trucks at Work

Will rising business optimism further boost freight?

Positive vibes remain fairly strong within the U.S. business community right now concerning the outlook for 2015, though that’s being tempered by a number of factors, with the recent 11% drop in year-over-year retail sales over the Thanksgiving holiday one such reason for cautiousness.

Still, all that aside, most executives at large and small businesses alike are exuding an air of optimism regarding their prospects for the new year – and such confidence may by extension continue to bolster strong freight volumes.

For example, according to the fourth quarter AICPA Economic Outlook Survey, some 64% of the business executives polled said they are optimistic about prospects for the U.S. economy over the next 12 months; up from 52% in the third quarter and up from 38% during the same period in 2013.

For perspective, Arleen Thomas (at left), AICPA’s senior VP of management accounting and global markets, said business executive optimism hovered as low as 9% in the third quarter of 2011.

Some 67% of business executives are slightly more optimistic about their own companies’ prospects (up two percentage points from last quarter) with 71% saying they expect their business to expand in the coming year, up three percentage points from the third quarter.

“The number of executives who say they are planning to hire immediately has gone from 13% a year ago to 23% this quarter,” Thomas noted. “As clouds lift on the economy, companies are shifting back into growth mode.”

Things are also looking brighter from the perspective of small business owners, who are the most optimistic they have been in more than six years, according to the latest Wells Fargo/Gallup Small Business Index.

Last conducted between Nov. 10 and 14, the group’s overall Small Business Index score increased to a positive 58 in November, up from a positive 49 in July this year and up 34 points from a year ago. While below pre-recession levels, the score – which measures small business optimism – is the highest it has been since January 2008 when it was positive 83.

The future expectations score is helping drive the rise in optimism, noted Lisa Stevens (at right), head of regional banking sales for the Pacific Midwest Region at Wells Fargo.

She said the “future expectations” score in the Wells Fargo/Gallup poll increased to a positive 37 in November, up from a positive 17 a year ago.

The poll’s “present situation” index or how business owners rate current conditions for their businesses also continues to steadily climb, having increased to a positive 21, up from a positive 7 in the fourth quarter of 2013.

Several factors contributed to fourth quarter’s “optimism improvement,” noted Stevens, which include:

  • Small business owners are feeling better about their company’s financial situation for the year ahead with 71% expecting their overall financial situation to be very or somewhat good over the next 12 months, up from 66% in the third quarter of 2014.
  • Hiring is expected to increase over the next 12 months, with 26% of small business owners reporting they plan to increase the number of jobs at their companies a little or a lot, up from 20% in July 2014.
  • More business owners plan to make investments in their businesses over the next 12 months as 29% expect to increase the amount of money they allocate for capital spending compared to 25% in the prior quarter.
  • Revenue forecasts remain positive over the next 12 months with 51% of small business owners saying they expect their company’s revenues to increase a little or a lot, and just 14% expecting a decrease.

“The latest Index scores show that small business owners are becoming more confident about the future,” Stevens pointed out. “With steady improvements in the operating environment and the economy, small businesses in general are making great strides, are in a better financial position and are seeing more opportunities to invest in their businesses for the long-term.”

She added that “positive trends” in hiring and stronger cash flows show that small businesses are healthier and are on much more solid footing as they look toward 2015.

And if that footing stays “solid,” then freight flows might just keep staying strong, too. We’ll see how that pans out.

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