PNC Economic Outlook Survey: Higher Costs to Increase Prices

PNC Economic Outlook survey resultsThe PNC Economic Outlook survey revealed that 48 percent of U.S. small business owners anticipate increased sales in the next six months, compared to 42 percent in the fall. Nevertheless, the biannual study, conducted by Artemis Strategy Group by phone between January 31 and March 4, found that though 37 percent expected profit increase, 37 percent also planned to raise selling prices to combat rising non-labor costs.

Of the 1,445 owners or senior decision-makers of small and mid-sized businesses with annual revenues of $100,000 to $250 million surveyed, 64 percent saw higher non-labor costs. Almost three quarters (72) percent said that a sustained rise in energy prices would affect their business negatively. Two-thirds reported plans to increase prices by more than two percent, compared to the seven percent with a mind toward cutting prices.

Improvements include 62 percent reporting an optimistic outlook (compared to 57 percent in the fall) on their local economy and 58 percent hopeful about the national economy (compared to 41 percent in the fall). A quarter (24 percent) anticipate hiring full-time employees (compared to 22 percent last fall and 12 percent in the spring of 2009). Seven percent said they planned to reduce full-time staff, a slight improvement from last year, though dramatically better than the 23 percent figure in spring 2009.

"The recovery light hasn't turned green, but it's a lighter shade of yellow," said Stuart Hoffman, chief economist for The PNC Financial Services Group, Inc. "The survey results support our view that the half-speed recovery that began in July 2009 is transitioning into a self-sustaining economic expansion for 2011-2012 which will not be derailed by higher energy prices, Europe's sovereign debt problems or the disaster in Japan."

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