PNC survey: Small business owners optimistic despite inflation, recession worries

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A new survey from Pittsburgh-based PNC Bank has found that small and mid-sized business owners and executives are optimistic about the near-term future.

In the bank’s semi-annual Economic Outlook survey, about half (49 percent) of small and mid-sized business owners reported being highly optimistic about the near-term prospects for their businesses.

“This survey demonstrates that business owners see conditions as generally still solid despite concerns over high inflation,” said PNC Chief Economist Gus Faucher. “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.”

The survey found that while expectations about their own businesses remain highly optimistic, those small and mid-sized business owners who are pessimistic about the future has risen – from 2 percent in spring to 7 percent as of August 8. However, almost seven in 10 (69 percent) see a recession coming in the next year.

“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.”

Respondents said their biggest concerns centered around inflation and the impact of price hikes. Continued price increases are in the works among nearly two-thirds of businesses – a high for the survey, now in its 20th year. Of those looking at raising prices, more than a third (36 percent) said they expect to raise prices by 5 percent or more over the next year, up from one in four last spring.

The rationale for raising prices shifted from keeping up with non-labor costs (from 63 percent last spring to 38 percent in the latest survey) to favorable market conditions (from 22 percent last spring to 44 percent now). Fewer than one in five (18 percent) said price increases were due to rising labor costs. Seven in 10 (69 percent) said they were making other adjustments to address higher inflation, including increasing efficiency, cutting costs and managing cash flow.