Business More Cautious, Concerned – PNC Survey

PITTSBURGH – Presidential candidates’ belligerent campaigning and wider swings in U.S. stock markets have made owners of small and mid-sized businesses more cautious about the next six months and more pessimistic about the economy, a semi-annual phone survey conducted for PNC finds.

The results of the survey, released today, found that 43% of those asked are pessimistic about the U.S. economy, the highest figure since 2012 and up from 33% last fall.

Only one in four said they plan to hire more employees, the same as in last fall’s survey, and “Most are unhappy with presidential candidates’ plans for business,” PNC reports.

Regardless, despite the increase in “negative sentiment,” the chief economist for PNC, Stuart Hoffman, says the “potential for recession [this year] remains very low.” Indeed, PNC projects real GDP growth this year will be 2%, slightly less than was recorded in 2015 and less than the department projected last December.

As for Ohio, for the same reasons, small and mid-sized business owners have the same sentiments as others in the PNC survey and for the same reasons — but to a lesser degree. PNC economist Mekael Teshome reports Ohio business owners expect stable sales and profits despite presidential candidates’ loose talk and the lows the stock markets have recorded.

Only 9% of Ohio business owners anticipate lower profits over the next six months, he said, noting that’s the lowest figure since the surveys began seven years ago.

Nearly four in five business owners, 79%, expect to show a net profit this year, Teshome reports, up from 59% last fall. Their average profit is 7% of sales and 23% expect to make more than 10% of operating expenses, up from 17% last fall.

More than half of Ohio businesses, 51%, expect to record higher sales this year and 45% expect this year’s profits will exceed last year’s.

More than four in five, or 81%, said they will not grant themselves a pay raise during the next six months and 80% said their contributions to their retirements would remain unchanged.

Only 13% said they expect to seek a new loan or increase their lines of credit. The possibility of rising interest rates – much less likely with Fed Chairwoman Janet Yellin adopting a dovish stance this week – is not influencing their decisions to stand pat.

The effects of the Affordable Care Act seem to have become more certain. Nearly half, 46%, reported they paid more for health insurance in 2015 and 26% expect their costs to rise even more. This is down from 46% last fall.

As for the effects of the Affordable Care Act on their decisions to add to their workforces, 84% said it had no effect last year and 85% said this spring it will have no effect this year.

Overall, says Teshome, “Manufacturing, health care and professional services will lead Ohio’s job growth with education, finance, leisure and hospitality providing support. Improvements to nationwide consumer finances stimulated a record year for auto sales, sustaining production and income. Downside risks come from a weak global economy and a strong dollar that could hurt exports more than expected.”

Returning to national findings, PNC found that pessimism among business owners rose ever so slightly from last fall: 40% said they were not hopeful about the next months; the spring survey found that number rose to 41%.

As for adding to their workforce, last fall 19% said they planned to hire more employees. This spring, that dropped to 12%.

Owners will grant fewer pay raises. A year ago, 26% said they intended to increase compensation over the next six months. Last fall, that figure rose to 36% but dropped to 23% in the latest survey.

The shortage of skilled workers remains. Nearly four in 10, 38%, say it’s harder to find qualified employees than it was six to 12 months ago. The biggest void is technical skills specific to a business, to wit, computer applications, tools or machinery.

Business owners feel slightly less pressure to raise prices. Only one in four, 26%, say they intend to charge higher prices compared to 28% last fall. Only 47% expect to see their suppliers raise prices compared to 60% six months ago.

And despite the drop in energy prices, nearly four in five, 78%, expect they’ll see consumer prices rise this year.

Methodology: Artemis Strategy Group, a communications/strategy firm, conducted the PNC Economic Outlook Survey between Jan. 21 and March 8. Artemis telephoned and surveyed 1,867 owners or senior decision-makers of small and mid-sized businesses across the United States with annual revenues of $100,000 to $250 million. The results reported above are based on their responses and deeper interviews with 502 of them across the United States including businesses within the PNC footprint, which includes Ohio.

Copyright 2022 The Business Journal, Youngstown, Ohio.