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Small Businesses Owners Optimistic About 2023, Even With Downbeat Economic Forecasts.

While economic uncertainty is negatively impacting radio revenue in the first quarter, some just-released research suggests a bright forecast for local businesses, which account for most of station advertising dollars.

The good news comes from a national survey conducted in January by Artemis Strategy Group for PNC Financial Services Group, among 500 owners of companies with self-reported revenue of anywhere from $100,000 to $250 million. The results show that nearly six in 10 owners of small and mid-sized businesses are highly optimistic about their company's prospects in the next six months, which, over the semi-annual survey's 21-year history, marks an all-time high point.

At the same time, the gap between these owners' optimism compared to the broader U.S. economy hits a survey high of 34 percentage points, nearly twice the survey average of 18 percentage points over those 21 years. Nearly two-thirds (63%) believe that business conditions in the U.S. will improve – while 58% expect to see sales increases – in the next six months.

“Although we expect the Federal Reserve to continue to raise interest rates in the spring of 2023 and economic growth is slowing, businesses remain optimistic about their own near-term prospects. In particular, business owners are finding that strong market conditions are prompting decisions to raise prices for the goods and services they offer," PNC Financial Services Group Chief Economist Gus Faucher says.

PNC's survey results also suggest the good news could extend to listeners and potential customers, as fewer businesses than in the survey's last three waves, 21%, expect to increase consumer prices by 5% or more in the next six months, down considerably from last fall's 36%. Less than half (47%) see supplier prices increasing in the next six months, down from more than half (53%) last fall and near the 46% level of a year ago.

Small business owners also now see the glass half full when it comes to supply chain issues, as the survey shows fewer are experiencing inventory shortages, more expect the situation to improve vs. how they felt six months ago, and only two in ten owners (18%) says this is their biggest concern. "It is clear that inflationary pressures are easing,” Faucher says. “Businesses are finding it easier to obtain materials and supplies, inventory levels are returning to normal, and businesses are expecting inflation to slow. But with the tight job market, labor costs remain a concern.”

On the hiring side, though, the news isn't anywhere as good. Just over one in 10 owners (13%) expect to increase their number of full-time employees over the next six months, down from two in 10 (21%) both last fall and a year ago (20%), while the 15% expecting to hire more part-timers is the same as seen last fall, and up from 8% a year ago. In addition, more than one-third (36%) of businesses actively hiring employees say it's become harder to hire qualified candidates over the past six months, with the lack of applicants the biggest challenge, for nearly half (47%), ahead of candidates' lack of job-related skills or experience (22%), and compensation requirements that are higher than the business can afford to pay (19%).

Complete national and regional results of PNC's survey are available HERE.

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