Capital Spending Cut Back at U.S. Small Business — Gallup

Old-fashioned Main Street
Old-fashioned Main Street

U.S. small business owners are planning to put capital spending on hold next year, according to a recent survey by Gallup. Only 20% of business owners expect to increase capital spending in 2013, compared with 34% who expect to spend less. The difference yields Gallup's index reading of -14, the lowest level in more than two years.

Capital spending plans reached a low reading of -23 in November 2008 and were slightly positive in the first half of this year before turning neutral in the third quarter.

The November survey also showed that 40% of small business owners cut their capital spending in the past 12 months, compared with 18% who increased spending. The index reading of -22 is roughly equal to a reading of -24 in October of last year.

Gallup notes a pattern of deferred capital spending since the recession of 2008-2009:

[M]any small businesses have experienced multiple capital spending deferrals and as a result are falling behind their competition, not only in capital improvements, but also in the use of new technologies. The longer this capital investment squeeze continues, the more of a threat it poses to the ultimate survival of any company in today's intensely competitive operating environment.

Gallup also suggests a "potential for explosive capital spending" when the U.S. economy gets back on a sustainable growth path.

Paul Ausick

Filed under: 24/7 Wall St. Wire, Economy Tagged: Gallup, small business, small business capital spending plans