Optimism for the future of the U.S. economy and business prospects is at an all-time high in PNC’s latest Economic Outlook survey of small and mid-size business owners. That sentiment comes despite fewer respondents predicting increases to demand and profits in the next six months.

Just one year ago, a record 56% of survey respondents – which include business owners or financial decision makers at more than 500 small to mid-size businesses nationwide – reported optimism for the future of the U.S. economy. That number jumped to 58% in the latest survey, with optimism for business prospects climbing to 84% (from 76% a year ago.)

In contrast to that reported optimism, is a declining number of respondents who say they expect demand (down to 58% from 64%) or profits (down to 48% from 57%) to increase in the next six months. Additionally, nearly half (46%) of business owners say they are “extremely concerned” about inflation in the coming months with more than a third also reporting they are “extremely concerned” about the risk from higher tariffs (38%) and supplier prices (36%).

“While it may seem counterintuitive that business owners remain optimistic despite also reporting fears around tariffs, inflation and profits, it’s important to remember that those concerns are still statistically lower than in other survey cycles,” said PNC chief economist Gus Faucher. “After powering through a global pandemic it’s unsurprising that these leaders feel confident in their ability to prosper despite today’s challenges.”

Fears around prices

The top challenge business owners are facing is uncertainty around pricing. In addition to the aforementioned concerns around inflation and tariffs, more than half (51%) said they anticipate price increases from suppliers. That’s up from the 45% who anticipated increases in the spring, but down significantly from a year ago (59%). Consequently, 58% of respondents said they expected to increase prices – up from Spring 2025 (53%), but down from a year ago (61%).

Among those who expect to raise prices, more than half (54%) are attributing those price increases to non-labor costs, which is a sharp increase from the 37% who answered that way in 2024. Fewer business owners reported the cost of labor (30%), or favorable market conditions (15%) as reason to raise prices. Both of those factors are down from a year ago.

Tariffs are playing a key role in pricing according to respondents. Nearly half (48%) reported that they believe tariffs are leading to increased prices that suppliers are charging them. Similarly, 46% reported that tariffs contributed to their decision to raise the prices they are charging customers.

“It’s a bit of a roller coaster effect when it comes to opinions on pricing over the last few survey cycles,” Faucher said. “As they weigh how tariffs are and may impact their business going forward, it seems many business owners accept that price increases are likely, but perhaps not as definitive as a year ago.”    

A pause on hiring

As prices rise, those business owners who reported planning to hire over the next six months dipped to just 13% (from 18% a year ago.) Even among those who do plan to hire, nearly 40% said it is more challenging to do so than six months ago. Respondents reported the top challenges to hiring as:

  • Lack of skills or experience needed – 30%
  • Lack of applicants – 29%
  • Candidates’ inability to meet legal/security requirements – 16%

Fall Economic Outlook by the Numbers:

  • 44% - the number of respondents who believe a recession is likely in the next 12 months. But only 16% feel it is “extremely likely” that the U.S. economy will enter recession;
  • 17% - the number of business owners who say higher tariffs have increased the level of inventory in their business. It mirrors the percentage of business owners who say tariffs have decreased their level of inventory;
  • 52% - the number of business owners who say tariffs have had no impact at all on their level of inventory;
  • 23% - the number of respondents who believe their cash reserves will be lower at this time next year, marking the first time in survey history that number has exceeded the percentage of respondents who feel cash reserves will be higher in a year (22%); and
  • 24% - the number of business leaders who believe Artificial Intelligence is the technology that will most impact their business over the next two years.

To see the full 2025 PNC Fall Economic Outlook Survey results visit pnc.mediaroom.com.

 

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