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U.S. Business Owners’ Outlook Improves on Hiring and Sales

The Spring 2011 PNC Bank survey of small and mid-sized business owners shows a return to cautious optimism to this past Autumn and much improved from their record-high pessimism of two years ago.  As owners across all industries await sales growth, more plan to raise selling prices to preserve profits in the face of widespread, higher non-labor costs.

The key findings are as follows:

More Optimistic about Own Company.  Just over one-fifth (22%) remain optimistic about their own company’s prospects during the next six months.  Just under one-fifth (17%) are pessimistic which is down from 23% in Spring 2010.

Hiring Outlook Improves.  24% expect to hire full-time employees during the next six months, up slightly from last Autumn and Spring (both 22%) and up significantly from the Spring 2009 low point (12%).  In addition only 7% plan to reduce full-time staff.

Price Hikes to Preserve Profits.  Nearly two in five (37%) plan to raise their selling prices and only 7% intend to cut their prices, which is a significant rise in pricing pressures from recent surveys.

Inflation Expectation on the Rise.  Over three quarters (77%) expect consumer prices to rise in 2011, up significantly from Autumn and Spring 2010.  A scant 2% expect consumer prices to fall this year.

Higher Energy Prices Will Restrain Growth.  Nearly three quarters (72%) say that a sustained rise in energy prices would have a negative impact on their business.

Capital Spending and Credit Access Rise.  59% plan to increase capital spending, little changed from Autumn but well above 49% a year ago.  Technology equipment spending leads the list of priorities.  In terms of access to financing, 13% say it is easier to obtain credit, 42% say it’s neither easy nor difficult and 28% say it is more difficult than three months ago.

Own Business vs. U.S. Recovery.  More owners report noticeable improvement in their own business performance.  Just over one fourth (28%) say their business was never hurt or has already improved.  32% now expect noticeable improvement within one year while 38% say more than a year away.  In contrast, the overwhelming majority (86%) say the U.S. economy has not begun to noticeably improve.  59% say the start of the U.S. recovery is more than one year away.

Full Business Investment Expensing in 2011.  Only 57% report being aware of the full expensing of business investments in 2011 included in the Small Business Jobs and Credit Act of 2010.  Of those aware, only one out of five say this policy will cause them to increase their business investment in 2011.

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