America's small businesses are more optimistic about the economy: The Discover Small Business Watch, a monthly index on the pulse of small business owners, increased in May 2010 for the second straight month, to 87.4—its highest level in seven months—up 2.3 points from its April reading of 85.1, Discover reported.

Although confidence in the economy is growing, 51% of small business owners say current business conditions are forcing them to cancel or postpone vacations or time off this year; nevertheless, that's down from 58% who said so a year earlier.

Confidence in Current Economy: 21-Month High

Over one-third (35%) of surveyed small business owners say the economy is getting better, up from 31% who said so April. Still, 51% say the economy is getting worse, down just 1 point from the 52% who said so in April.

The percentage of small business owners who say the current economy is good or excellent was 12% in May—the highest level registered in 21 months, and up from 13% who said so in April. Still, 56% say the economy is poor, and 32% say it is fair.

Below, other May indicators from the Discover Small Business Watch:

• Small businesses reporting cash flow issues held steady at 45% in May, the lowest level in seven months; 48% reported no cash flow issues.
• 28% of small business owners said economic conditions for their businesses are getting better, down from 30% who said so in April. Some 44% said conditions are getting worse, down from 48%, and 24% said conditions are the same, up from 19%.
• 25% of small business owners said they were increasing business spending in May, up from 23% who said so in the previous month, while 46% said they were reducing spending in May (vs. 43% in April) and 31% said they are spending the same (vs. 25% in April).

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More Small Biz Owners May Find Time for a Break

Although 55% of small business owners say it has been two or more years since their last weeklong vacation, some have begun to cut back on the amount of time they spend on the job: 56% say they now work six or more days a week, down from 61% who said so in 2009. Prior to the recession, 45% of small business owners said they worked six- and seven-day work weeks.

Other time-related findings:

• 44% of non-self-employed people say they will delay or cancel a vacation this year (vs. 51% of small business owners).
• Among small business owners who are postponing or canceling vacations due to the economy, 78% cite money and business-related bills as the primary reason.
• Small business owners continue to work longer hours per day than they did pre-recession: 38% report working 10+ hours per day in 2010, compared with 30% who reported doing so in 2008. Only 19% of the general population reported working 10+ hours per day in 2010.
• Small business owners are still working through the holidays far more than most people: 55% say they will work through most, if not all, holidays, slightly down from 57% who said so in 2009, but higher than the 47% who reported doing so in 2008. By contrast, only 27% of non-self-employed people say they will work through most or all holidays.

About the data: The Discover Small Business Watch is a monthly index measuring the relative economic confidence of US small business owners who have fewer than five employees, a segment that consists of 22 million businesses producing more than a trillion dollars in annual receipts. Commissioned by Discover Business card, the survey was conducted by Rasmussen Reports LLC among a national random sample of 750 small business owners.