Small Business Owners Outlook Improves

Six out of 10 small business owners in the U.S. plan on increasing capital spending but delay hiring because of their concerns about the economy from PNC Financial Services Group.

Overall, the outlook of small business owners has improved slightly as eight out of 10 (compared to 76 percent in the spring) are moderately to greatly optimistic about their own company’s prospects today while 20 percent are pessimistic (vs. 23 percent).

Until we see a solid pattern of small business hiring and investments re-established, the economic recovery will be a bumpy road, but not another ride over a cliff," said Stuart Hoffman, chief economist for The PNC Financial Services Group, Inc. 

"These findings support PNC’s view that the economy will remain transitional for the rest of 2010 and into the first half of 2011 — with weak but persistent ‘half-speed’ real GDP and job gains."

While three out of four owners (76 percent compared to 78 percent in the spring) do not intend to seek a new loan or line of credit, they do see greater access to financing. Thirteen percent (vs. 9 percent in the spring) says it’s easier to obtain credit while 44 percent (vs. 38 percent in the spring) say it’s neither easy nor difficult compared to three months ago.

Fewer than half (42 percent) expect their sales to increase compared to 47 percent in the spring. In terms of profits, 31 percent expect an increase, down from 37 percent in the spring.

Nearly a quarter (22%) expect to hire full-time employees, the same as spring and significantly better than one year ago (17 percent). Only 12 percent plan to reduce their workforce compared to 14 percent in the spring and 18 percent one year ago. Manufacturing companies are most likely to hire followed by the service industry.

The overwhelming majority (91 percent) say the U.S. economy has yet to noticeably improve. Seven out of 10 (71 percent) feel the recovery is more than one year away compared to 20 percent who expect improvement within the next 12 months.

The sentiment is slightly less negative closer to home as 57 percent are optimistic and 42 percent are pessimistic about the prospects for their local economy. This compares to 41 percent optimistic and 58 percent pessimistic for the U.S. economy.

One out of three (34 percent) say weak sales/demand for service is the most important challenge facing their business today. Their second concern at 21 percent is "changes in government policy that affect my business." These far outdistanced health insurance (12 percent) and taxes (11 percent).