Business owners’ optimism grows as economic conditions improve

Fifty-five percent of small business owners surveyed are optimistic about the national economy, and 79% are very optimistic about the prospects for their business.

A new survey of small and medium-sized businesses shows business owners’ optimism about economic conditions over the next six months has reached a 22-year high as fears of a recession recede. found.

PNC’s semi-annual survey found that a majority of business owners surveyed (55%) are very optimistic about the national economy, up from 34% last fall and 26% a year ago. found. Less than half of business owners expect to raise prices over the next six months as inflationary pressures ease. Additionally, more than 6 in 10 business owners (63%) report being “very optimistic about their local economy.” This number is up from 47% last fall and just 30% a year ago.

There is also growing optimism about their own businesses. Nearly 8 in 10 business owners (79%) report being very optimistic about the outlook for their business, which is similar to last fall (77%) and a year ago. (60%).

Construction leads other sectors, with 85% expecting their business to improve in the future. Business leaders with larger revenues ($20 million to $250 million) are the most optimistic about the national and local economy and their own businesses, while those with smaller revenues ($100,000 to less than $3 million) of business owners are the least optimistic.

“Despite concerns about the broader economy, business leaders continue to say their businesses are doing well in a strong and improving economy,” said Gus Faucher, chief economist at PNC. I think it’s going well.” “However, risks remain. PNC expects near-term economic growth and will be closely monitoring employment data, inflation, and when and how the Federal Reserve makes decisions on interest rates. ” he said.

Inflationary pressures appear to be declining, according to the survey results. Less than half (47%) of businesses expect to raise prices in the next six months, down from last fall (55%). Of those who expect to take this step, just over one in 10 (12%) plan for an increase of 5% or more, up from last fall (25%) and a year ago (23%). Diminished. Four in 10 (41%) expect a modest increase of 1% to 2%, an increase from last fall (19%) and last spring (32%).

At the same time, four in 10 companies (40%) expect the prices charged by suppliers to increase in the next six months, compared to six months ago (49%) and last spring (47%). It is decreasing. Four in ten (41%) of those expecting supplier prices to rise only expect a small increase of 1-2%, with even fewer expecting an increase of 5% or more. Few (13%).

“The supply chain issues that were a key driver of the inflation spike in late 2021 and last year have largely been resolved,” Faucher said. “Yet, employers remain under pressure from rising hiring and compensation costs. These pressures may ease this year as an unusually tight labor market eases somewhat.”

Issues of concern to small business owners include:

need for funds: Nearly two in 10 business owners (18%) expect their need for business financing to increase in the next six months, up from 7% last fall and 9% a year ago. ing. Among companies that expect their financing needs to increase, fewer than 3 in 10 (28%) say they will definitely or probably request new loans or lines of credit during that period. was. This suggests that the majority are likely to use sources other than new loans/credit facilities to meet their future financing needs.

One of the biggest challenges for small business borrowers today is the high cost of capital. The central bank held interest rate cuts unchanged on January 31, despite expectations that the Federal Reserve would begin cutting rates soon as inflation began to decline. Federal Reserve Chairman Jerome Powell announced that the Federal Open Market Committee (FOMC) has decided to keep interest rates unchanged. No changes as of January 31, 2024.

related: Fed interest rates remain unchanged, but challenges remain for small business borrowers

profit expectations: Earnings outlook for the next six months remains stable, with just over half (52%) of those surveyed expecting profits to rise, down from the levels recorded last fall (55%) and a year ago (49%). It’s in the middle. Few companies expect profits (5%) or sales (5%) to decline over the same period.

Fraud and cyber concerns: Two-thirds (66%) of business owners are moderately or extremely concerned about the risk of fraud (59%) or potential cybersecurity breaches (58%).

Their concerns are understandable.according to Strong DMis an organization that helps businesses manage and audit access to databases, servers, clusters, and web applications.

· 82% of ransomware attacks in 2021 were against businesses with fewer than 1,000 employees, and 37% of businesses affected by ransomware had fewer than 100 employees.

· 61% of small and medium-sized businesses were targeted by cyberattacks in 2021.

· 46% of all cyber breaches impact businesses with fewer than 1,000 employees.

· 55% of people in the US are less likely to continue doing business with a company that has been compromised.

StrongDM also reported that the overwhelming majority of cyberattack incidents for small and medium-sized businesses cost between $826 and $653,587.

Recruitment challenges: Small businesses continue to face challenges such as: Challenges in finding workers. According to the survey, owners and recruiters say the problem is a lack of overall applicants (28%, up from 32% for fall 2023), followed by a lack of candidate experience and skills (22%, unchanged from fall 2023). Salary/benefits or flexibility requirements (9%, 8% in fall 2023).

Despite this, two in ten (21%) business owners expect to increase their full-time workforce over the next six months, up from 9% last fall and 13% a year ago. Masu. Three-quarters (74%) expect the number of full-time employees to remain the same, while only a minority (4%) expect it to be reduced. A quarter (25%) of companies looking to hire staff say it has become harder to hire qualified employees, compared to last fall (35%) and a year ago (35%). 36%).

PNC’s Economic Outlook Survey surveyed 500 small business owners nationwide with self-reported income between $100,000 and $250 million. PNC Financial Services Group Co., Ltd. (New York Stock Exchange: PNC). is one of the largest diversified financial services institutions in the United States.