Small and medium-sized enterprises (SMEs) in the US are guarded about hiring new staff, according to a survey that also shows a fall in optimism from six months ago.
The new Economic Outlook survey from PNC Financial Services Group finds that SMEs are uncertain about their sales and the US economy.
PNC’s chief economist Stuart Hoffman says:
“The economy is expanding but growth remains disappointing.”
“These findings show small business owners are carefully taking half steps forward while keeping a wary eye looking for more customers and action in Washington to resolve the debt ceiling impasse and keep the federal government open.”
The PNC survey is carried out twice a year and started in 2003.
The latest survey, dated October 2013, shows that SME owners are:
- Not hiring – nearly three quarters (73%) do not intend to take on new staff in the next six months: only 16% plan to hire new employees while 8% intend to reduce staff.
- Less optimistic – there has been a fall in optimism among SMEs in the last six months: 22% of owners are currently optimistic about their business prospects compared with 26% in the spring.
- Planning to invest – however, nearly two thirds (63%) are planning to spend on capital investment in the coming six months, which is 5% higher than the last two surveys. Spending on technology tops the list of business investment plans.
- Not planning to take out loans – while only one in five say they will probably or definitely be taking out a new loan or line of credit in the next half year, this is higher than in the last two surveys (12% in spring, 19% a year earlier).
- Keeping prices under control – 36% say they are going to increase prices, while only 5% say they are going to reduce them. Half of those intending price hikes plan to keep them at around 1-2%, which is under the Federal Reserve’s 2% inflation goal.
- Mostly not worried about rising rates – 59% say rising interest rates will not hurt their business, compared with 40% who say they will.
The survey also found that small business owners believe:
- Government spending cuts have made no contribution – 48% say the $85 billion of federal spending cuts or sequestration made little contribution to economic recovery in 2013, while 40% reckon it made it worse.
- Healthcare reform has had no impact – 78% say the Affordable Care Act has had no effect on their hiring plans.
- House prices will continue rising – 58% say they think house prices in their area will go up in the coming year, compared with 48% saying this in the spring and 37% a year ago.
The survey report concludes:
“These findings support PNC economists’ baseline forecast that the US economic and jobs expansion will proceed at a moderate pace in the latter half of 2013, as the economic drag from higher tax rates and the $85 billion cut in federal spending (“sequestration”) fades and Europe slowly pulls out of recession.”
Main sources: PNC Economic Outlook Survey – Fall 2013 press kit; PNC Financial Services Group news release via PR Newswire, 3 October 2013.