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Breaking Flooring NewsFloor CoveringsBusiness Insights

Small And Mid-Size Business Owners Report Slight Chill in Optimism

PNG-Outlook
Historic optimism about the national economy from the spring (50%) chilled slightly this fall (40%), but remains well above fall 2017 (29%), according to the PNC Economic Outlook, a semiannual telephone survey of small and middle-market business owners and executives.
October 3, 2018

Pittsburgh, Pa. -- Historic optimism about the national economy from the spring (50%) chilled slightly this fall (40%), but remains well above fall 2017 (29%), according to the PNC Economic Outlook, a semiannual telephone survey of small and middle-market business owners and executives. Four out of 10 business leaders described their outlook for the national economy as optimistic, the second-highest rating in the 15-year survey.

Those with a pessimistic outlook increased to 12% this fall from the historic low of 8% in the spring. Similarly, half (51%) are optimistic regarding their own businesses for the next six months, a drop from the historic high of 58% in spring 2018. Pessimism remains at a historic low of 4%.

"Optimism for small and mid-sized business owners about the national economy, their local economies, and their own companies remains near record highs, although it has slipped slightly since the spring, according to our fall 2018 survey," said Gus Faucher, chief economist of The PNC Financial Services Group. "Hiring expectations also are near a record high, as we continue to witness the second-longest economic expansion in U.S. history."

Nearly two-thirds (64%) of business leaders expect increased sales, dropping marginally from spring 2018 (69%). Expectations for increased profits are the second-highest on record (59%), only outpaced in spring 2018 (64%). Businesses anticipating a decrease in profits remains at a historic low (6%).

The number of business leaders forecasting rising prices in the next six months gained momentum. More than half (53% vs. 41% in spring 2018) anticipate suppliers charging more; 45% (vs. 29% in spring 2018) plan to charge their customers more. Of those planning to raise the prices they charge customers,45% anticipate a 1-2% hike, while 25% anticipate a 5% or more increase. Increasing business, favorable market conditions and rising labor costs are among the key drivers of higher pricing. Only 3% of businesses anticipate lowering prices.

Small and mid-size business leaders expect wages and hiring to remain near the record highs reported in spring 2018. 46% expect to increase wages (vs. 49% in spring 2018), while the number planning to decrease workers' wages remains at a survey low of 2%.

With the labor market continuing to tighten, 8 in 10 (82%) business leaders across all industry sectors say they already have taken one or more actions to retain existing or to attract new employees by: increasing wages/salaries (44%), offering or increasing bonuses (24%), and boosting benefits (24%). Over one in four (28%) have allowed more flexible work arrangements and one in ten have relaxed hiring standards.

Four out of ten (41%) respondents report currently selling or buying items or services from other countries to some extent. The percentages are significantly higher for manufacturers (59%) and wholesalers/retailers (47%). However, only 8% of all respondents characterize the volume of that trade as "large." When asked to choose sides on increasing U.S. tariffs on other countries' goods based upon what's best for their own business, 41% are in support (33% in spring 2017) and 31% are opposed (32% in spring 2017); more than a quarter of business leaders (27%) are uncertain.

As a result, four out of ten anticipate paying higher prices to suppliers. Three out of ten business leaders (31%) expect to increase the prices they charge their customers should the U.S. impose increased tariffs on other countries' goods, but nearly half (47%) expect no impact. Nearly half of business leaders (48%) do not expect any impact on company sales, with 18% anticipating increased sales. Only 8% forecast decreased sales as a result of increased U.S. tariffs on goods from other countries.

Familiarity with the impact of the federal Tax Cuts and Jobs Act of 2017 on business increased slightly to 32% (vs. 27% in spring 2018); 35% are familiar with the new tax law, but uncertain how it will affect their business, dropping from 45% in spring 2018. Significantly fewer business leaders (34%) view the potential impact to their bottom line as positive (43% in spring 2018 ). A third (32%) still believe it is too early to tell or simply do not know. 75% of business leaders have not made or do not expect to make any changes to their businesses as a result of tax reform, jumping from 61% in spring 2018.

For more information, visit pnc.mediaroom.com.

KEYWORDS: business management flooring retailers market trends

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