Ohio Small-Business Owners Still Wary of Economy
YOUNGSTOWN, Ohio -- Statistics might say the economy is improving but the owners of small and mid-sized businesses in Ohio remain wary, the spring PNC Economic Outlook finds. The outlook was released Thursday.
Business owners are cautious about what the future has in store for their companies with “just two in 10 (21%) optimistic about their own prospects in the next six months, compared to 20% last autumn and 17% a year ago,” the survey found. Ohio business owners are "more optimistic about the local economy than the national economy,” says PNC economist Mekael Teshome. Only 2% described themselves as optimistic about the national economy while 9% said they’re optimistic about the local economy.
“Moderately optimistic” are 42% of business owners surveyed about the national economy (up from 36% six months ago) to 45% about the local economy, unchanged from six months ago.
Fifty-five percent said they’re pessimistic about the near-term health of the U.S. economy compared to 46% about the local economy. That’s 2% and 1% lower respectively than six months ago.
When it comes to expectations for their own businesses, 56% expect to see their sales increase in the next six months, up from 38% six months ago and 44% a year ago, while 36% expect sales to remain flat, down from 43% a year ago and 39% a year ago.
Where 38% expect to see their profits increase, 46% expect the same levels and 17% fear a decrease. This contrasts with six months ago, when 31% expected to see their profits rise, 46% expected the same levels and 21% lower profits.
Adopting a wait-and-see attitude explains why 45% of Ohio small and mid-sized business owners are putting off hiring until they see improvement in the local economy while 29% say they’re waiting to see a more stable global economy. Thirty-eight percent say they’re asking more of their workforces rather than hire more employees.
An improving economy is allowing 40% of business owners to raise their prices, Teshome notes, versus 4% who intend to lower their prices to remain competitive. This shows “they expect higher sales,” Teshome says.
The improving economy is reflected in housing prices continuing to rebound, Teshome says. ”Building on the dramatic turnaround first seen in our autumn (2012) survey,” the PNC Economic Outlook says,” 39% expect home prices will rise over the coming year, up from 30% in autumn and just 21% one year ago. Only 9% expect house prices to decline.” The gains in the prices of houses reinforces business owners’ sense the economy is getting better.
A dissent comes from Mary Smith of East Liverpool, owner of Tri-Ohio Realty, who participated in the spring survey. She does not see the residential real estate market improving and says banks are difficult to work with. She and her six colleagues have been working on selling repossessed houses and short sales -- “We have a lot of this,” she says – and people with good credit are given the runaround.
Smith tells of a very creditworthy man -- better than 800 credit score, she says -- who could put 20% down and waited as the house he wanted to buy went through all the inspections a local bank wanted. “He went to South Carolina for financing,” Smith recalls. “[Local] banks have money.”
If single-family houses are moving slowly, “people buying homes to rent out” are not, she has found. “Housing prices are not rebounding like you read in the paper,” she says. “Houses are selling but not at the prices they should.”
Just over half of the respondents, 52%, told the PNC survey they expect to spend on capital investments in the next six months, only 2% above last autumn’s numbers and down from 64% a year ago. Technology equipment will lead capital spending “with other types of business equipment a distant second,” the PNC survey found.
Demand for loans continues but remains “tepid,” PNC says. One in five, or 20%, intend to take out a new loan or increase their line of credit versus 11% six months ago and 17% a year ago.