Business owner optimism has reached a record 21-year high, according to the latest semi-annual survey conducted by PNC Financial Services Group, Inc. (NYSE:PNC). The study, which concluded on August 9, 2023, reveals that 77% of small and mid-sized business owners are highly optimistic about their companies' outlook for the next six months, a significant increase from 49% a year ago and 60% in the spring.
This surge in optimism persists despite PNC economists' predictions of a shallow recession starting in early 2024. PNC Chief Economist Gus Faucher attributed this spike in part to the resilience demonstrated by business owners during the challenging years since the pandemic began. "Business owners who survived that demanding time are confident in their ability to run their businesses and focus on what they can control versus what they can't," Faucher said.
Expectations for sales, profits, and demand have remained strong. Approximately 62% of business owners anticipate an increase in sales, while 55% expect profits to rise. Moreover, 64% predict an increase in demand over the next six months. Nearly two-thirds (65%) attribute this increased optimism to confidence in their ability to manage their businesses effectively.
However, hiring remains a significant challenge. Nine out of ten employers plan to maintain their current staffing levels, with only 9% intending to increase their workforce. Among businesses looking to hire employees, one-third (35%) report that it has become more difficult to find qualified employees over the past six months. The primary reason cited is a lack of overall applicants (49%), followed by candidates' lack of experience or skills (22%).
Inflation concerns have eased over the past year, and more than half (55%) of businesses expect to raise prices in the next six months. This figure remains unchanged from last spring but is significantly lower than the 63% reported a year ago. The main reasons for increasing customer prices include favorable market conditions (38%) and keeping up with rising labor costs (32%).
The ongoing series of Federal Reserve rate hikes over the past year has caught business owners' attention. Two-thirds (65%) of respondents believe these hikes will impact their business over the next year, including 31% who anticipate pressure on profits due to rate increases.
The survey also revealed growing interest among business owners in Artificial Intelligence (AI) applications. One-third (33%) believe AI could be beneficial to their businesses, particularly those in manufacturing (47%). Among those who consider AI useful, more than four in ten (44%) are already using AI applications.
Despite these challenges and changes, business owners remain focused on strategies for retaining employees and managing costs. Flexibility remains top of mind for two-thirds (67%) of employers who consider flexible work arrangements important for their businesses.
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