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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.
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.
These concerns echo those the Connecticut Business & Industry Association’s latest annual survey of its members, conducted by accounting firm Marcum LLP. The biggest share of employers in that survey – 81 percent – reported difficulty finding and retaining workers, about the same as last year, and 91 percent believe the cost of doing business is increasing. Only 10 percent of business executives surveyed believe the state’s business climate is improving, while 41 percent say it’s static, and 33 percent believe it’s declining; only one quarter of business leaders believe Connecticut’s economy will expand over the next 12 months.
The percentage of top executives who say the lack of skilled job applicants is the greatest obstacle to growth increased seven points over last year to 46 percent.
“It’s clear that the jobs are there – what we need are the people to fill those jobs,” CBIA president and CEO Chris DiPentima said in a statement. “However, the high cost of living and doing business undermine our competitive advantages and employers’ ability to offer career opportunities for workers.”
