Small business owners are feeling better about the U.S. economy as inflation cools and recession fears ease, according to a new survey. In fact, economic optimism among small employers is at its highest level in 22 years, PNC Financial Services Group found in a survey of small and medium-sized business owners.
A majority of respondents – 55% – said they were “very optimistic” about the economy this year. That's up significantly from 34% last fall and 26% a year ago, according to the Pittsburgh-based bank. About eight in 10 owners also said they were confident about their own company's financial prospects. Just over half of the entrepreneurs surveyed expect their profits to increase in the next six months, while only 5% expect profits to decrease.
“The US economy is doing quite well. We had strong economic growth in the second half of 2023, with consumers spending more and businesses investing. This strength will continue through 2024,” PNC Chief Economist Gus Faucher told CBS MoneyWatch.
The results are based on a randomized telephone survey of 500 small and medium-sized businesses that have annual revenue between $100,000 and $250 million from Jan. 2 to Feb. 1, according to PNC.
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As Inflation is slowing, fewer small business owners also see the need to increase their own prices in the short term. According to PNC, 47% of companies surveyed said they expect price increases in the next six months, compared to 55% last fall. Of the companies that plan to raise prices, just over one in ten say they will do so by at least 5%.
The economic fate of small businesses is critical to the United States, with nearly 62 million Americans employed in such businesses, about 46% of the workforce, according to the Small Business Administration. In total, there are more than 33 million small businesses in the United States, accounting for the lion's share of jobs created. According to SBA data, small businesses added 17.3 million new jobs between 1995 and 2021, accounting for nearly 63% of the jobs created during that period.
The economy defied widespread predictions last year that the U.S. was likely to suffer a slump as the Federal Reserve raised interest rates to curb inflation. Gross domestic product – a measure of the value of goods and services – rose 3.2% annually in the final three months of the year and 2.5% for all of 2023, driven by solid consumer spending and robust job growth.
“The labor market is strong, there is good wage growth and employment growth, allowing consumers to increase their spending,” Faucher said.
The National Association for Business Economics forecast earlier this week that GDP will rise 2.2% in 2024; The group expects the consumer price index, a key indicator of inflation, to do so Decline to an annual rate of 2.4% this year, compared to 4.1% in 2023 and 8% in 2022.
Of course, small businesses continue to face a number of challenges. These include access to bank loans and the search for qualified workers. About 28% of companies surveyed by PNC said they are having difficulty attracting applicants, while many smaller employers say applicants lack the right experience or skills.
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Megan Cerullo
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