Recovery? Fat Chance, Say Small Biz Owners

The Fall 2010 PNC Economic Outlook, released today, found small- and mid-sized business owners believe the economic recovery is weak with more than one in three, 37 percent, identifying weak sales as their most pressing challenge. Their uncertainty about government policy and how it affects their companies ranks second with one in six, or 17 percent, identifying that as a concern.

The survey, conducted in August, found business owners feeling they are not participating in the recovery, said Robert Dye, senior economist at PNC, which is based in Pittsburgh.
Dye allowed that the survey was conducted "during a soft patch in the economy," which could account for the level of pessimism. Providers of financial services and the construction industry have not rebounded as fully as they hoped, he added.

The recovery is real, Dye noted, but it’s “bifurcated [with] larger, globally integrated companies who can manage their profits and cash flow headed in one direction” and smaller companies “more dependent on their regional economies” in another.

That the business owners haven’t felt direct benefits from the stimulus is not the same thing as saying the American Recovery and Reinvestment Act has had no effect, Dye said. The stimulus was targeted and many small-business owners say they haven’t felt its effects.

An overwhelming 95 percent of business owners surveyed said the U.S. economy has yet to improve, PNC reported, and 75 percent responded it will be a year before they benefit from the recovery. Respondents were asked if they believed they had benefited from the $787 billion appropriated under the American Recovery and Reinvestment Act passed in February 2009. Four in five, 80 percent, said they have not, up from the 75 percent last spring and about the same as a year ago when 82 percent said they had not.

Nearly two in five of the smaller enterprises, 39 percent, expect to see their sales rise in the next six months, a decline from 45 percent in PNC’s spring survey. As for profits, 29 percent expect an increase compared to 41 percent in the spring survey conducted last February.
One in four reported improved performance over the last six months.

Regardless, few foresee hiring new employees or adding to their work forces between now and next spring, only 6 percent saying they plan to hire full-time employees and another 5 percent saying they have begun to hire. Likewise, few anticipate they’ll be forced to lay off employees. “The majority expect their work force to remain the same,” PNC said.

On the bright side, “Most are saying credit is becoming more available” to meet their capital spending needs, Dye reported.

Gloomy as they were about the national economy, small-business owners saw their local economies “stabilizing,” PNC said. Four in nine, or 45 percent, were neither optimistic nor pessimistic about the health of their regional economies over the next six months while 63 percent described themselves as “pessimistic” about the national economy.


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