Small businesses are optimistic about the future despite their skepticism about the direction of the national economy, says Gus Faucher, Senior Vice President and Chief Economist of The PNC Financial Services Group.
PNC's recent Economic Outlook Survey found that only 2% of small business owners were pessimistic about their company's immediate future. Additionally, more than 50% of business owners anticipate an increased demand for products and increased sales within the next six months. However, only 15% of those polled were confident about the economy, a shocking change from last fall's 35% confidence rate. The share of business owners that were pessimistic about the economy rose from 10% in Fall 2021 to 23% in Spring 2022.
Despite the fact that small business owners believe these problems won't cause lasting issues in their own businesses, Faucher attributes their lack of certainty in the economy to conflicting data on employment, inflation, and supply chain issues.
A low unemployment rate is a hopeful piece of data that many owners find consoling. As of March 2022, it was almost identical to pre-pandemic rates (3.6%). Nearly 20 million jobs were added back, and Faucher says that employment rates will continue to rise throughout the year. Small businesses, in particular, have been feeling the windfall of this employment surge. ADP reports that employment in private-sector companies with fewer than 50 employees is 1.4% above pre-pandemic levels. Less than 25% of small businesses report that hiring is still a problem.
Additionally, small business owners believe that supply chain issues will not last forever, according to the PNC study. More than 60% of small business owners believe that the logjam will clear in no more than six months, and only 6% of respondents believe that supply chain issues will worsen.
However, the good news about employment rates is juxtaposed with sky-high inflation rates. More than half of those surveyed said they expect to raise their prices in the coming months due to non-labor costs. Faucher says that luckily, when supply chain issues subside, they will ultimately positively impact inflation rates.