Small and midsize businesses in Ohio have scaled back their economic expectations for the coming six months in an outlook tempered by slow growth and political uncertainty as the November elections loom, according to a survey conducted by PNC Bank.
Released Thursday, the survey shows that small- business owners are not entirely pessimistic about the state and national economy, but stagnant sales and rising health-care costs remain primary concerns.
“These businesses expected to see an increase in sales during the last year, but they went down, which signals a down-shifting in economic growth,” said PNC Economist Mekael Teshome. “It’s really a confidence issue; the fear factor is still there.”
Conducted between late July and early September, the survey sampled 150 small- and midsize- business owners, whose companies generate between $100,000 and $250 million in annual revenue. The survey’s sampling error is plus or minus eight points.
When compared with an earlier survey, released by PNC in the spring, it seems moderate economic growth is reflected in a more cautious economic outlook heading into the winter months, Teshome said.
One in six, or 17 percent of owners, said they planned to add employees in the next six months, a forecast largely unchanged from the spring, while 10 percent said they planned to reduce full-time staff over the same period.
“Since the recession, the growth rate has been extraordinarily slow,” said Cleveland-based economist George Zeller. “These firms have not been able to generate the kind of profits that lead to sustained hiring. The recession is still lingering, and it’s showing in these outlook surveys, wages and job numbers.”
Nationally, gross domestic product, a marker for growth, slowed during the second quarter to 1.3 percent from an annualized rate of 2 percent in the first quarter. The national jobless rate has stalled above 8 percent, leading the Federal Reserve once again to announce stimulative measures last month in an attempt to encourage long-term borrowing and reduce overall unemployment.
Still, only 11 percent of Ohio’s small-business owners plan on taking out a new loan or a new line of credit within the next six months, and 35 percent said they had no need for credit, according to the survey.
However, 50 percent of those surveyed plan on making capital investments such as equipment purchases and other productivity enhancers instead of hiring and increasing payroll.
To head off uncertainty surrounding nonlabor and health-care costs, such as health-care reform, tax policy and the November elections, 38 percent of those surveyed said they plan to preserve profits by increasing sale prices.
“Consumers have made progress in savings and paying down their debt,” Teshome said. “Companies are saying that costs are going up, and they want to pass some of those on to resilient consumers.”
Despite the survey’s weak outlook, Zeller said the Mahoning Valley continues to be a bright spot among Ohio’s urban areas.
Growth in the area’s manufacturing sector, increases in oil and gas activity and improvements in the area’s housing market have combined to keep layoffs down and the region’s economy stronger than in other parts of the state, he said.