Supply chain issues top the list of concerns for small business owners over the last six months, but they see those pressures easing by mid-year, according to new research. In the meantime, inflation is expected to continue impacting business owners, with a majority planning to further raise their own prices.
The latest PNC semi-annual Economic Outlook survey of small and mid-size business owners and executives is a good gauge of the overall economy, however analysts point out that the situation in Eastern Europe that’s unfolded since has likely intensified some of the sentiments expressed by respondents.
“The events in Ukraine were not on the minds of business owners when the survey was conducted in January,” says PNC chief economist, Gus Faucher, “There was concern at that time about rising prices, and that worry has likely intensified, given the rapid increase in energy prices, among other factors.”
In January, 34% of owners who rely on a supply chain said timeliness had worsened in the previous six months and 28% of businesses that rely on inventory are faced with the challenge of not having enough supply to meet expected demand. However, 57% expect these issues to improve in the next six months.
“Supply chain problems have been a big contributor to the highest inflation the U.S. has seen in almost 40 years. But it’s encouraging that most small businesses see this easing soon,” Faucher said. ”The wild card now is how long inflationary factors due to the Ukraine crisis last.”
Rising prices also are on the minds of business owners – 51% expect to increase their prices in the next six months and 34% percent say their prices have already gone up in the past six months.
“Six months ago, businesses were raising prices because demand was strong enough that they could. Now it appears higher costs are forcing them to,” Faucher said.
Turnover and Hiring Impacts
Forty-three percent of business owners report losing staff since the start of the pandemic, which they agree is bad for business. The top reasons for employee departures are illness or death (50%), worker concerns over health or safety (46%), and changes in lifestyle or priorities (36%).
Among businesses with employees, 26% say it’s become harder to hire qualified personnel. Businesses are responding to recruiting challenges, most notably through improved work conditions, like health and safety improvements, allowing more flexible work arrangements, and increasing compensation. In the meantime, businesses are coping with worker shortages by increasing existing employees’ workloads, having owners or managers cover shifts, and by increasingly relying on technology or automation.
Other key survey findings include:
• Vaccine boosterism: Fifty-six percent of business owners say a majority of their workforce has a COVID-19 booster vaccination. Sixty-five percent have taken some action to encourage boosters through a requirement (31%), assistance and/or education (29%), incentives (22%) or restrictions for those who choose not to receive the booster (19%).
• Tempered optimism: Business leaders’ expectations about their own companies remain strong with 47% feeling highly optimistic and only 2% feeling pessimistic. However, their outlook for the national and local economies has shifted to cautious.
• Business adaptation: Small and mid-sized businesses have made dramatic, lasting changes to adapt to the pandemic environment. Ninety-two percent have made at least one change to policies, processes, operations, or use of technology, and almost all of those owners expect one or more of the changes to become permanent.
For full survey results, visit pnc.mediaroom.com.
Labor and supply shortages continue to plague small and mid-sized businesses. Despite these challenges, there’s prevalent optimism, which experts say is an encouraging sign of what’s to come.
