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PNC Survey Shows Ohio Business Owners Cautious
YOUNGSTOWN, Ohio – James Kerrigan, owner of Kerrigan Insurance in Hubbard, expects sales, profits and hiring to remain steady over the next few months.
“Insurance is an up-and-down business,” he remarked. “It’s been steady for 30 years. I’m busy all the time.”
Kerrigan’s expectations generally fall in line with those of other owners of small and midsize businesses in Ohio who participated in the latest PNC Economic Outlook Survey, which was released Thursday.
Owners of Ohio small and midsize businesses are “still rather cautious in their outlook,” remarked Mekael Teshome, an economist with PNC Financial Services Group, Pittsburgh.
“What that suggests is that the Ohio economy is in this slow and moderate pace of growth,” he said. “That is consistent with what we have been seeing in the past year or so.”
According to the survey, nearly half -- 48% -- of the Ohio business owners surveyed expect their sales to remain the same over the next six months, up from 42% in April, while 39% expect them to increase, down from 48% earlier in the year, and 10% expect them to decrease. Last October, 44% expected sales to remain the same, 45% expected them to increase and 10% expected a decrease.
Also, 56% expect profits to remain the same, up from 43% in April, while 29% anticipate them increasing, down from 37% in the prior survey, and 12% expect them to decrease, down from 18%. In October 2013, 47% expected profits to remain the same, 36% expected them to increase and 12% anticipated a decrease.
The vast majority -- 82% -- expect to keep the same number of employees, down from 83% in the spring but up from 73% in the October 2013 survey. About 11% of owners planned to add staff, up from 10% in the spring but down from 17% a year ago. Just 3% expected to decrease their workforce, down from 6% in April and 7% in fall 2013.
Also in the survey, 82% of Ohio business owners were optimistic about their own company’s prospects in the next six months, compared with 85% in the spring and 80% a year ago. Only 16% are pessimistic compared to 13% in the spring and 20% a year ago.
Half -- 50% -- were moderately optimistic about prospects for the national economy, 6% optimistic and 44% pessimistic, compared with 8% optimistic, 47% moderately optimistic and 43% pessimistic in April. A year earlier, 6% were optimistic, 41% moderately optimistic and 52% pessimistic.
The Ohio business owners were more bullish on local economies, as 54% were moderately optimistic, up from 50% in the April survey and 53% a year ago; 11% were optimistic, unchanged from April and up from 8% last fall; and 34% were pessimistic, down from 37% in the spring and from 38% last fall.
Nationally, 85% of business owners say they are optimistic about their own company’s prospects, comparted with 87% in the spring, and more than half – 52% -- expect sales to increase during the next six months. In the most recent biannual survey, 38% of small and midsize businesses plan to increase employee compensation in the next six months, the most since 2008, PNC said. Also, 38% plan to raise selling prices.
“Wage growth has been a missing piece of the labor market puzzle to date,” said Stuart Hoffman, PNC chief economist, in a news release announcing the survey results. “With more business owners planning pay raises and higher prices for consumers, these findings strongly support our forecast for a faster economic and jobs expansion and also send important signals to fed policy makers that the economic recovery is speeding up.”
In Ohio, nearly one in four -- 24% -- small and midsize business owners plan to increase employee compensation in the coming months, down from 29% in the spring and 27% a year ago. A third plan to increase selling prices.
National indicators have shown a “marked improvement in economic momentum and the survey results are consistent with that” while Ohio is on more of a steady pace, PNC’s Teshome said.
One of the more surprising findings was the impact of last winter’s harsh weather Ohio small and midsized businesses reported, he said. A higher percentage -- 43% -- than average reported they had been affected by the weather “but a big portion of those that are affected [71%] said they haven’t recovered,” he continued.
Much of this was from lost sales that owners said they haven’t recouped, he explained. While someone looking to make a major purchase such as a house or automobile likely just delayed it because of the weather, “people who were going to eat out earlier in the year were not going to have two lunches when the weather warms up,” he said. “Some of these businesses lost sales that are not coming back.”
The expectation for the remainder of this year and 2015 is persistent moderate growth in the Ohio economy, with a slight pickup occurring next year as the U.S. economy gains traction, PNC’s Teshome said. The Youngstown and northeastern Ohio market is “very much consistent with what we expect, full and steady growth and a slight pickup coming ahead with the national economy picking up,” he added.
Copyright 2014 The Business Journal, Youngstown, Ohio.
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