Survey finds business owners are optimistic

A national survey by PNC Bank indicates that small and mid-sized business owners are more optimistic this year about their company’s prospects and the U.S. economy.

Surveys completed in Michigan show the sales optimism is even higher than the national level, although only 15 percent in Michigan are planning to add full-time employees this year.

Eighty-seven percent of Michigan business owners are optimistic about their company’s prospects, and the percent of those “very optimistic” has risen sharply from the last survey six months ago. Their optimism about the local economy has increased significantly. In terms of the U.S. economy, 85 percent are optimistic compared to the 60 percent who gave that answer in the fall survey.

Hiring still appears to be almost on hold in Michigan, however, compared to other parts of the nation.

The PNC survey analysts said the positive outlook nationwide is fueled by lower energy prices; 55 percent say the drop in fuel cost will have a positive impact on profitability. Forty percent plan pay raises for their employees, a significant lift from 32 percent one year ago.

In Michigan, however, 26 percent said they expect to increase employees’ pay, down from 33 percent six months ago.

As expectations for supplier price increases have gone down, just three in 10 (29 percent) across the nation will raise selling prices, down from 37 percent a year ago. Of those planning hikes, 38 percent will increase by 1 to 2 percent, aligned with the Fed’s 2 percent target. This correlates to falling supplier pricing expectations — 52 percent expect an increase in supplier prices compared to 62 percent six months ago — and is also aligned with the FOMC’s recent small downward revision to inflation in 2015.

“As crude oil prices fell to six-year lows, both consumers and businesses experienced savings that are now reflected in business optimism,” said Stuart Hoffman, PNC’s chief economist. “As inflation pressure eases, wages and consumer spending power will tick upward. In response, business owners are expecting a better 2015, which directly supports what PNC forecasts will be the fastest real GDP growth since 2004.”

Twenty-two percent plan to add full-time employees while 72 percent will keep staffing the same — both similar to the fall results. Thirty-nine percent claim it has been more than two years since they last increased staff, with the average increase of five to six employees among that group.

In Michigan, 15 percent plan to add full-time employees, which is very little change from Michigan surveys last fall. Only 1 percent are planning layoffs, a significant drop from 10 percent six months ago. Eighty percent will keep staffing the same, and more than half — 57 percent — have not increased employment for at least 12 months.

In the national survey results, expectations for business prospects are promising, but loan and credit demand continue on a slow upward path. While the majority are not seeking outside financing, 22 percent claim they probably or definitely will take out a new loan or line of credit in the next six months compared to 17 percent in the fall. Forty percent last took out a loan or line of credit more than two years ago while 23 percent never have.

In Michigan, 15 percent said they probably or definitely will seek new loans in 2015; last fall that was 11 percent. Forty-seven percent said they last took out a loan or line of credit more than two years ago; 23 percent never have, which is the same as the national survey result.

Gary Lambrix, a general contractor from Morley and president of the Mecosta County Chamber of Commerce, was surveyed by PNC; he says he believes the drop in fuel prices has a direct positive impact on small business, especially in a rural region where wages are lower and many families are struggling to get by.

“When fuel went up and things slowed down, that was the perfect storm that drove the economy into a recession,” said Lambrix.

Lambrix, 58, is a serial entrepreneur, and very active in Mecosta County government. His contracting business over the years has mainly focused on excavation and site preparation for new homes, and while he is now “getting a few more orders on the books,” business is not nearly as busy as before the recession. He said he hasn’t excavated a basement in years “because it’s cheaper for people to buy a repo than build.”

Lambrix believes some individuals who didn’t weather the recession seem to have “an entitlement attitude: ‘OK, what are you going to do for me?’ If the business community or government can change that attitude, then I think things will really spike up.”

Another business owner who was surveyed by PNC was Roger Roe, owner of American Home Land Realty in Holland. Roe, 67, worked in retail management about 25 years, then about 12 years in sales of manufactured homes. He got into real estate because he ended up helping customers find land for their new modular homes.

American Home Land Realty is a real estate brokerage, and while he used to have an agent or two working for him, he now is completely on his own.

“I’ve been extremely busy,” said Roe. “I have no lack of business.

“It appears, at least in this area, that there are more buyers looking than inventory available. I’m starting to see more and more new construction, which for a few years was a pretty barren area with not much going on,” he said.