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Entrepreneurs Increasingly Pessimistic About Economy
 

But a new report finds a wide optimism gap along age lines.

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For young entrepreneurs, hope springs eternal. But for older entrepreneurs? Eh, not so much.

Overall, start-up owners have lower expectations for the U.S. economy in the third quarter, according to the Startup Confidence Index release on Tuesday by entrepreneurship research organization the Kauffman Foundation and online legal services company LegalZoom. But the study found young entrepreneurs to be significantly more optimistic than their older counterparts.

The survey results marks the second straight quarter of growing economic pessimism among small business owners. Nearly 40% of entrepreneurs think the economy will contract over the next 12 months. That's an increase from 36% of start-up owners surveyed in the second quarter, and 31% in the first quarter, according to the index. Another 29% expect no change.

There is significant optimism gap between young and old entrepreneurs, however. Almost all (98%) of 18- to 30-year-old survey respondents, and 83% of 31- to 40-year-old entrepreneurs, are confident their businesses will experience higher profits over the next year.

One area of increasing pessimism is consumer demand. A third of start-up owners expect a moderate to significant decline in consumer demand in the next 12 months. That's a 6% raise from the second quarter and 8% more than survey results from the first quarter, Kauffman says.

On Tuesday, the U.S. Department of Commerce announced that although personal income increased 0.5% ($61.8 billion) in June, personal consumption remained essentially flat, dropping by 0.1%, a $1.3 billion decrease.

The Kauffman report was essentially in line with other recent surveys--including one from The Small Business Authority that found only a slight 0.22% increase in its index of small business activity.

A survey of more than 500 small business owners conducted by TD Bank also reflected the growing economic concerns: While 35% of owners say their business is understaffed, only 21% plan to make at least one new hire in the upcoming months.

An infographic of the survey findings can be found below.

Startup Confidence Index

IMAGE: Photo courtesy Gloria Garcia
Last updated: Jul 31, 2012

JOHN MCDERMOTT is a business and culture reporter whose work has appeared in the Chicago Tribune and Playboy and on AOL.com. He recently moved from Chicago to Brooklyn, New York, to work for Inc.com.
@J_M_McDermott




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