About half of small and mid-size business owners and executives recently surveyed by PNC remain optimistic about the near-term future of their businesses despite inflation, supply chain disruptions and political and geopolitical uncertainties.
PNC’s semi-annual Economic Outlook survey found that 49 percent of business leaders were highly optimistic that their own companies would remain strong, similar to the response when thee survey was conducted in the spring, PNC said in a statement. But more business leaders have started to have doubts about their companies. After only 2 percent of respondents said they were pessimistic earlier this year – a historic low for the 20-year survey – now 7 percent of business owners feel pessimistic about their companies.
The PNC Economic Outlook survey was conducted from July 5 through Aug. 8 and included responses from leaders at 500 small and mid-sized businesses nationwide with self-reported revenue of $100,000 to $250 million.
Concerns about inflation and the impact of rising prices remain top concerns for owners and executives, the survey found. Almost two-thirds of businesses expect to continue raising prices, and 36 percent of those businesses expect to increase consumer prices by 5 percent or more during the next year. In the spring, about 25 percent of survey respondents thought they would raise prices by that much.
While the main reason for raising prices last spring was an effort to keep up with rising costs, 44 percent of survey respondents cited favorable market conditions as the primary reason for increasing prices. Labor costs were cited by 18 percent of respondents, and other reasons included price pressures on their businesses, elevated supplier costs and capital spending.
“This survey demonstrates that business owners see conditions as generally still solid despite concerns over high inflation,” Gus Faucher, PNC’s chief economist, said in the statement. “The business leaders surveyed are indicating that they are now increasing prices because they can, rather than because they have to. This reflects continued strong demand across the economy, despite higher interest rates.”
Business leaders are making other moves to adjust to higher inflation, with 69 percent of survey respondents saying they are taking steps such as increasing efficiency, cutting costs or managing cash flow.
More than two-thirds of business owners expect a recession, with 69 percent saying a recession is likely in the next 12 months.
“There has been much discussion and debate about the probability of a recession in the near-term and business owners clearly are considering this possibility,” Faucher said. “While PNC views the likelihood of recession as low in the near term, we believe there is an elevated 45 percent probability of recession over the next two years.”
Some businesses that rely on a supply chain continue to remain concerned, with 47 percent saying they are affected by supply chain disruptions. To address the issue, businesses have taken steps such as broadening the base of suppliers (33 percent) and stockpiling inventory (27 percent). Other responses included price hikes (20 percent), shifting sale or delivery commitments (17 percent) and creating exclusive supplier relationships (14 percent). About 40 percent of business leaders expect supply chain timeliness to improve during the next six months.
While the share of businesses facing staff shortages has dropped from 61 percent in the spring to 41 percent, businesses continue to take steps to adjust to shortages, including increased overtime or workloads for existing employees, relying on owners or managers to cover staff hours, using temporary or gig workers, and adding new technology or automation to cope.
