This summer, expansion plans among small businesses were at the lowest they've been in years as most small businesses are focused on maintaining profits versus expanding to address increased demand. This will likely change quickly, though, if the economy continues to recover.
As you can see from the chart:
- Expansion plans fell consistently during the first year of the recession beginning in Q407 as businesses hunkered down during the initial period of economic weakness.
- The uptick in Q208 was likely driven by businesses reassessing their postponed expansion plans after roughly a year of weathering the economic downturn. At the time, you may remember, lots of pundits were predicting a quick return to growth--and expansions plans are all about current tone of business and confidence.
- The collapse of Lehman and the credit markets drove expansion plans to the lowest level of the recession as credit was frozen and businesses became very fearful.
And how are we doing now? The government releases these numbers quarterly, but we suspect expansion plans increased in Q3 as the recovery progressed.
The big question, of course, is what will happen as we get through Q4 and into next year. Right now, the economy is being driven primarily by the Federal stimulus. For confidence to really return, we will have to start seeing real organic growth in the economy by early next year.
Additional reporting by Rory Maher.