PNC Bank: Business owners' optimism strong

PNC Bank says its most recent survey of business owners shows their optimism at a 21-year record high, even as hiring concerns linger.

PNC says 77% of surveyed small business owners and mid-sized business owners are optimistic about their business despite some economists' expectations for a national recession.

And almost half of respondents say there are not enough applicants for open positions, the Pennsylvania-based bank says in a recent news release. The survey included businesses in Southwest Florida, including two in Naples, a PNC spokesperson told the Business Observer.

The semi-annual survey found that business owners' optimism about the outlook for their own businesses in the next six months reached a 21-year high, amid strong expectations for sales, profits and demand.

PNC economists themselves have predicted a "shallow recession" starting in early 2024. But business owners and some other banks appear to disagree. Earlier last week, Goldman Sachs issued a report lowering the chances of a national recession within 12 months to just 15%.

And U.S. business leaders' outlook about their own companies has risen sharply, PNC officials say, with over three-quarters (77%) feeling highly optimistic, compared to 49% a year ago, and 60% in the spring of 2023.

Business owners also have more positive outlooks for the national, local and global economies, improving significantly, the PNC survey found. Almost half (47%) are highly optimistic about the local economy, compared to 29% last fall. About one-third (34%) are highly optimistic about the national economy, compared to 22% a year ago.

Profit and demand expectations are higher, PNC found, with 55% expecting profits to rise, compared to 46% last fall, and 64% expecting an increase in demand in the next six months, compared to 57% 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," says Gus Faucher, PNC chief economist, in a news release. "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."

The challenge, business owners reported, was hiring. Nine in 10 employers say they intend to hold steady on hiring with just 9% planning to increase their staffing and just 1% expecting layoffs, the survey found.

Among businesses looking to hire employees, one in three (35%) say it's become harder to hire qualified employees over the past six months, similar to last spring (36%) and a year ago (39%).

The most common reason employers say it has become harder to hire is that there are not enough applicants overall, with 49% giving that reason. Other reasons cited are: candidates' lack of experience or skills (22%); high salary or benefit requirements (14%); and inability to meet legal or security requirements (6%).

The survey also found inflation waning a bit has not deterred business owners from planning price hikes. More than half (55%) of businesses say they expect to increase prices in the next six months, PNC found, unchanged from last spring but less than a year ago (63%).

One concern that has abated is on the supply chain. The pandemic clogged ports and drove up truck rates, but now nearly a quarter (23%) are most concerned about the cost of materials, up from 9% last fall, while 14% are most concerned about labor costs, up from 4% last fall.

The portion worried about supply chain disruptions dropped to 10%, from 25% last fall.

The PNC Economic Outlook survey was conducted by telephone from July 5 to August 9, among small and mid-sized businesses with self-reported revenue of $100,000 to $250 million. Nationally, 500 interviews were conducted. Sampling error for the nationwide results is plus or minus 4.4% at the 95% confidence level. The survey was conducted by Artemis Strategy Group of Washington, D.C.