Delta variant quells economic surge among small businesses [WSJ/Vistage August 2021]

With 22% of small businesses reporting impacts of the Delta variant and another 22% expecting to be impacted in the future, small business leaders are tempering their projections and investments to ride out the currents that have quelled the economic surge. Over half – 56% of small businesses – report no impacts or concerns for the future, a figure that has likely shifted since the time of the survey due to rising cases and hospitalizations.

In response to the rising cases Delta variant, small businesses had a wait and see attitude in early August. Those who have not or don’t anticipate impacts are staying the course; 55% of small businesses have not made any changes to date. Many are instead deferring to CDC guidelines, WHO guidance and OSHA and state mandatory requirements which have changed since the time of the survey.

Of those that have made changes, the biggest change reported by small businesses was in their masking policies. Over a quarter – 27% – report changing masking policies which is now likely a significantly higher number based on federal guidelines and local mandates that have changed since the time of the survey.  After masking, small businesses are revisiting their return to work plans, which could range from delaying the return to the office for those in a remote environment, or allowing greater flexibility for those on a hybrid model.

Some small businesses are revisiting their approach to vaccinations, which again may take a very different approach now that the Pfizer vaccine has received FDA approval. However, as of the survey, which was conducted the first week in August, just 14% have changed vaccination policies, which is no surprise as in prior surveys small businesses feel that vaccines are a personal choice. As more employers revisit their policies and mandate vaccines, they may pave the way for and inspire small businesses to reconsider their policies as well.

Small business confidence normalizes 

For the third consecutive month, the confidence of small businesses has declined, returning to levels recorded earlier this year. This drop does not signal a reversal, rather a settling as consumer spending has normalized following the boost driven by government stimulus, and rising cases of Delta variant has resulted in more conservative spending and projections.

All components of the Small Business Index declined from last month, but declining optimism in the economy was the component that had the largest decline. Just 39% of small businesses expect the economy to grow in the year ahead, the lowest proportion since April 2020. Unlike last April, just 20% expect the economy to worsen, compared to 57% in April 2020. 

This cautious optimism has resulted in more moderate expectations for the year ahead amid rising cases of Delta and the return of mask mandates in many areas.  The index dropped again, not signaling a reversal, rather the normalization of expectations as the initial surge driven by return to normal behavior, Government stimulus and pent up consumer spend played out and the D variant begins to impact confidence.

Small businesses pull back reins on spending in response to increasingly conservative revenue projections

In June revenue projections hit a peak with 80% of small businesses projecting increased revenues in the year ahead. The August survey reveals that the proportion that expects increased revenues has slipped to 73%, just above the 72% recorded in February. This moderation has also created a slight decline in expansion plans with those planning to expand their workforce falling 3 points to 68% and those planning to increase investments falling 4 points to 47%.

The good news in the declines in factors related to projections and expansion plans is that the shift is to remain the same vs declining. Conditions are not worsening, but small businesses have simply paused to wait out the storm that Delta is bringing in.  Certainly in some areas impacts of Delta will be small, but other regions are facing more intense impacts that have called state and local governments to return to mask mandates as well as vaccine requirements for state employees. 

Small businesses should continue to monitor community data, also understanding the impacts and restrictions in place for customers, distributors, vendors and remote employees. As our network widens in the virtual world, this requires monitoring of what other businesses, industries and countries are adopting as well.

Download the August report for complete data and analysis

For the complete dataset and analysis of the June WSJ/Vistage CEO Confidence Index survey from Dr. Richard Curtin, download the report and infographic to learn more, including.

• Optimism about recent improvements to the economy 
• Investment and hiring plans soften
• Revenue and profit expectations moderate

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About the WSJ/Vistage Small Business CEO Survey

Interactive data from WSJ/Vistage Small Business survey

The August WSJ/Vistage Small Business CEO survey was conducted August 2 – 9, 2021 and gathered 570 responses from CEOs and leaders of small businesses with revenues between $1 million and $20 million. Our September survey, in the field September 7 – 14, 2021, will capture sentiment of small businesses following the FDA approval of the COVID-19 vaccine.