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With the interest rate hikes expected to persist, U.S. small businesses are still optimistic while still being alert to the impacts that the current economic pressures, according to two bank surveys.
JPMorgan Chase found in a mid-year business outlook survey that small businesses – those with annual revenues under $20 million – have lingering concerns about rising costs, with 77 percent saying their expenses have gone up by 6 percent or more in the past year.
Around 45 percent expressed heightened concerns about the limited supply of candidates for hiring and 38 percent feel that the government should focus on lowering tax rates and reducing credits and deductions, while 16 percent report supply chain disruptions as a top challenge.
“These findings confirm what our bankers are hearing every day from our clients – that despite ongoing concerns about recession, inflation, and staffing, small business owners are optimistic,” Ben Walter, CEO of Chase Business Banking, said in a statement. “To their credit, they continue to demonstrate an ability to adapt and adjust through the ups and downs of economic cycles.”
Despite these challenges, 67 percent of business leaders expect revenues to increase over the next six months, and 45 percent say they’re “hitting the accelerator” on growth – up 10 percentage points since November 2022.
The study showed that the majority or 81 percent are planning to borrow money and 45 percent are looking to expand their businesses.
The survey pointed out that this optimism can be tied to deepened mental health and stress management focus in the workplace, with nearly three-quarters of 71 percent reporting that these factors are an important issue for their business and employees and that more business leaders said they are offering mental health days since November—up by 13 percentage points.
More than a third or 36 percent are reporting operations or sales outside the United States – a significant increase in November. Business leaders also report adjustments such as raising prices or cutting non-essential costs and purchasing smaller inventory orders amid rising costs.
Owners are also looking into technology advancement, with 33 percent planning to adopt ChatGPT into their businesses next year, while 42 percent plan to add other artificial intelligence applications, which is up by 14 percent from November.
PNC: Small Biz Optimism at 21-Year High
Optimism from small and mid-sized businesses is at a 21-year high, according to PNC Bank’s survey, as business owners are expecting strong sales, profits, and demand in the next six months.
PNC said that despite its economists predicting a shallow recession starting in early 2024, business owners’ outlook of their businesses has risen sharply with 77 percent feeling highly optimistic versus 49 percent a year ago and 60 percent in the spring.
This contrasts with the latest business confidence survey from the Associated Industries of Massachusetts, which found that despite data showing the state’s economy is outpacing the nation, confidence slipped slightly in August, to settle a few points above the break-even point that would indicate a negative turn in business sentiment.
“As a sales manager I have a good insight into the majority of businesses in our region and feel that most continue to be positive,” an advertising executive told AIM in a statement the group released along with its report. “Recruitment continues to be a need for all but specifically in manufacturing, home improvement and health sectors. Product shortage is no longer the primary discussion.”
Owners’ outlooks on the economy also improved in PNC’s survey, with 47 percent highly optimistic about local economy versus 29 percent the previous year. In comparison, 34 percent are optimistic about the national economy than 22 percent a year ago.
Profit and demand expectations are higher with 55 percent expecting profits to rise compared to 46 percent the year prior, while 64 percent sees demand from their customers increasing in the next six months than 57 percent a year ago.
“While the large spike in optimism among these business owners is a surprise, it can be attributed in part to the resilience that they demonstrated during the challenging years they have faced since the pandemic began,” PNC Chief Economist Gus Faucher said in a statement. “Business owners who survived that demanding time are confident in their ability to run their businesses and focus on what they can control versus what they can’t.”
Hiring is a challenge, as 9 in 10 employers intend to hold steady on hiring. Among them, 35 percent said it’s harder to hire qualified employees over the past six months, and the most common reason is that there are not enough applicants and the candidates’ lack of experience or skills.
“It is interesting to note that while hiring is a concern of business owners, half of employers have seen an increase in employee enthusiasm for their work over the past year. This means the people they already have are clearly engaged,” Faucher said.
