PNC Survey Finds Owners of Small and Midsize Companies Remain in an Upbeat Mood About the Economy

Scott Suttell, Managing Editor of Crain's Cleveland Business

Owners and executives of small and midsize businesses have high levels of confidence about the economy and do not expect a recession before the end of this year, though they're a little less upbeat about what 2020 might bring, according to a new survey from PNC Financial Services Group Inc.

The Pittsburgh-based company, which is a major player in Northeast Ohio's banking market, said in a summary of its PNC Economic Outlook survey that 55% of respondents describe their outlook for their own business as optimistic, up from 51% in the survey in fall 2018. The latest figure is near the spring 2018 record high of 58% for the survey, which PNC has conducted for 16 years.

Nearly two-thirds (63%) of small and midsize business owners and executives said they expect their own company's sales to increase, about the same as fall 2018 (64%), but down from 69% in spring 2018. A ittle more than half (52%) said they expect their profits to increase; in fall 2018, that figure was 59%.

The PNC Economic Outlook survey was done by telephone from July 1 through Aug. 23. Slightly more than 500 owners of small and midsize businesses responded to interviews conducted by Artemis Strategy Group of Washington, D.C. Sampling error for the results is +/- 4.4% at the 95% confidence level, PNC said.

Asked to describe their outlook for the national economy, 39% of respondents said they were "highly optimistic," while those saying they were pessimistic hit a survey record low of 7%.

To that end, 67% of respondents said a recession is unlikely before the end of 2019, while just 30% said it is likely.

"But there is a shift in the outlook for a recession in 2020, with businesses split on their outlook," PNC said, noting that 47% of respondents believe a recession is likely next year, and 46% believe it is unlikely.

"PNC expects the current economic expansion, already the longest in U.S. history, to last into 2020. However, the risk of recession in 2020 and 2021 has risen in recent months, due to increased trade tensions and reduced fiscal stimulus," said Gus Faucher, the company's chief economist, in a statement.

Among other survey findings:

• 38% of small and midsize business owners and executives "anticipate tariff policies to trigger higher supplier prices over the next six months, and a small but increasing number (13%) expect their total sales to decrease based upon their understanding of tariffs," PNC said. Supplier price increases are expected most by industries that are the biggest purchasers of goods: wholesalers/retailers (50%); construction (43%); and manufacturers (42%).

• 84% of respondents expect consumer prices to rise in the next 12 months. Business leaders expecting inflation of 3% or more jumped to 43% from 37% in fall 2018.

• 33% of small and midsize business leaders "plan to increase the number of full-time employees within the next six months, tying the survey record high from spring 2005, while those expecting to reduce the number of full-time employees remains at 3%, near the survey low (2% spring and fall 2018)," PNC said. Nearly half (47%) — a record high for the survey — "say it's harder to find qualified employees than it was six months to a year ago, with 54% reporting increased wages/salaries, up from 44% in fall 2018," according to PNC.

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