Small Business Owners Plan Hiring, Expect Higher Sales

Friday, April 06, 2012

PITTSBURGH -- An upbeat outlook on sales will prompt nearly one in three U.S. small business owners to add employees over the next six months as optimism returns to positive levels unseen since before the 'Great Recession' of 2008-2009. Expectations for sales and profits have rebounded from near-historic lows last fall, according to the biannual PNC Economic Outlook survey.

Owners have growing optimism about the U.S. economy and their own company's prospects, the survey found. Nearly three in four (70%) plan to invest in their business in the next six months.

Despite the good news, inflation expectations remain elevated, as 40% of owners plan to raise their selling prices, while only 7% intend to cut prices, indicating a significant rise in pricing pressures; 69% plan to increase prices by more than 2%, which is Federal Reserve's inflation "goal."

"With the start of the baseball season, the economic recovery is on base, but heading home, but rising energy prices, elevated unemployment and a recession in Europe could still prevent it from scoring the winning run," said Stuart Hoffman, chief economist at PNC. "These findings show a significant improvement in business expectations and optimism, and thus strongly support PNC's baseline forecast that the U.S. economic and jobs recovery will continue to play ball in 2012-2013."

The survey, which gauges the mood and sentiment of small and medium sized business owners, found that 58% expect their sales to increase in the next six months, up sharply from last fall (40%).  Just 10% expect them to decrease, which is significantly lower than last fall (20%).  Profits are also on the rebound, as 43% expect an increase compared to 29% in the fall.

Other findings about the next six months include:

• 75% of respondents believe Federal action would positively influence their hiring plans. Reduced regulation is the most desired (non) action.
• Potential skills gaps could pose a threat to owners' hiring plans, as (45% say requirements for employees' skills and background are higher than in the recent past.  Computer/technical abilities, experience "in the field" and communication skills are the top three priorities.
• 23% will probably or definitely take out a new loan or line of credit in the next six months, compared to 15% last fall and the most since Spring 2009 (29%). Some 18% say credit is easier to obtain than three months ago, which is higher than last fall (10%).
• Owners are positive on the local level, with 65% optimistic about their own local economy (compared to 57% in the fall).
• Pessimism about the national economy is significantly reduced compared to six months ago, with 58% of owners reportedly optimistic about the U.S. economy's prospects during the next six months (compared to 31% in the fall).

PNC Financial Services Group Inc. is one of the nation's largest diversified financial services organizations.

Published by The Business Journal, Youngstown, Ohio.