Sunny Side Up:
Optimistic Business Owners Expect Higher Sales

The expected success of small businesses nationwide in 2015, per new survey findings, directly supports what PNC forecasts will be the fastest GDP growth in the U.S. since 2004.

By Stuart Hoffman, Chief Economist, PNC

Every spring and fall, we survey small and mid-size business owners across the United States for their outlook over the next six months about their business and the economy in general.

In the spring 2015 survey, we found business owners to be the most optimistic since 2007 on the economy, and increasingly optimistic about their company’s sales and profits after cashing in on lower energy prices. The good news is that this translates to business owners planning wage increases for their existing employees. The bad news - they are not planning to hire new staff.  

Here are some supporting results from the latest PNC Economic Outlook survey:

  • 70 percent are optimistic about the U.S. economy – much more than 58 percent just last fall.
  • 83 percent are optimistic about their company’s prospects. Fifty-seven percent expect an increase in sales (highest since 2012) and 51 percent expect profits to climb (highest since 2007).
  • 40 percent of small business owners surveyed plan pay raises for their employees; a significant lift from 32 percent one year ago.
  • 72 percent will keep staffing the same while 22 percent plan to add full-time employees, which is little changed from the survey results six months ago.
  • 39 percent say it’s been more than two years since they last increased staff, with the average increase of 5-6 employees among them.

The positive expectations for business prospects seem to be at least partially driven by the plunge in energy prices. Of note, crude oil dropped to six-year lows in the tail-end of 2014. As such, 55 percent of small business owners surveyed expect the savings from lower energy prices to positively impact their profitability and 47 percent say the same about sales.

The drop in energy prices impacts every level of business, from suppliers to manufacturers, to transportation firms. According to our findings, consumers may also get some relief within the next six months.

Survey results show: 

  • Fewer suppliers are expected to raise the prices they charge businesses as 52 percent of business owners expect higher supplier prices, down from 62 percent in last fall.
  • Fewer businesses also intend to raise selling prices, with just three in 10 (29 percent) saying they plan price hikes (that’s down from 37 percent one year ago).
  • Of those planning price hikes, 38 percent will do so by just 1-2 percent.

We call this effect “easing inflation” and expect it to drive up consumer spending in the months ahead, which will bode well for small businesses as the roots of our economy.

The expected success of small businesses in 2015 directly supports what PNC forecasts will be the fastest GDP growth in the U.S. since 2004.

Read all of the PNC Economic Outlook Survey findings, both nationally and by region.

Stuart Hoffman discusses key survey findings. Watch the Video »

 


Stuart Hoffman views small business success as a driving force for economic growth.

In the spring 2015 survey, we found business owners to be the most optimistic since 2007 on the economy, and increasingly optimistic about their company’s sales and profits after cashing in on lower energy prices.