Brightening Skies

Small and midsize business owners have seen the economic data in the United States that shows inflation has cooled substantially during the past year, and economists who have backed off somewhat their forecasts for recession. And they’re by and large more optimistic than they were, at least about their businesses’ financial prospects, their revenue projections and their prospects of hiring new workers. But generally, they haven’t fully bought in to the prospect of a strong recovery, and recent surveys show they have an improving outlook, but also a cautious one.

”Small business owners want to believe and live in the news of positive stock market performance and lower inflation numbers,” said U.S. Chamber of Commerce vice president of small business policy Thomas Sullivan in a statement on the Chamber’s site. “However, employers on Main Street can’t seem to shake worker shortages, heightened costs of supplies, rising interest rates, and anxiousness over economic uncertainty. That anxiety is making this summer a long, hot, and sticky one.”

As they have done each quarter since 2017, Chamber of Commerce and MetLife in May surveyed about 750 small and midsize business owners about their sense of business conditions and the economy. They found a respondent base with an improving economic outlook, even though fewer than one in four indicated they thought the U.S. economy at that time was good. About 71 percent of respondents, a record in the survey, expect their businesses’ revenue to increase in the next year. A record 47 percent said they expect to hire more staff in the next year, too.

Increasing revenue and staff are the types of conditions that traditionally have generated increased business travel. Whether that happens remains to be seen, but it’s fair to say that the SME executives’ outlooks don’t suggest any widespread travel cutbacks are on the horizon, either.

“The challenges of our current economy may have delayed some small business owners’ plans to expand or hire more staff, but now they see opportunity for growth on the horizon,” Sullivan said in a statement accompanying the survey. “Small businesses are again showing remarkable resiliency.”

Since that survey, the U.S. Bureau of Labor Statistics released the Consumer Price Index which showed annual U.S. inflation had increased to 3 percent in June, down markedly from 9.1 percent one year earlier, and Goldman Sachs reduced its forecast likelihood of a U.S. recession to 20 percent from 25 percent.

The National Federation of Independent Business conducts monthly surveys of its small-business members’ outlooks, and its most recent results show a respondent base beginning to emerge from deep economic pessimism. While the net percent of those respondents who think the economy will be worse in the next six months is 40 points more than those who think it will be better—NFIB didn’t release precise figures—that’s down from 50 points in May. And its “Small Business Optimism Index,” a collective metric designed to measure sentiment over time, increased 1.6 points in June to 91, though far below the 49-year average of 98.

While the NFIB characterized their members’ outlook on business prospects and sales as “very pessimistic,” it still noted that “in some industries, such as construction, health care, transportation and some consumer services, spending and therefore labor demand remains strong.”

Still, SMEs on the whole in 2023 have not aggressively spent on general expenditures. According to American Express, overall corporate spending, which includes travel and entertainment expenditures as well as goods and services, among U.S. SMEs increased 2 percent year over year.

Amex chairman and CEO Stephen Squeri in July during the company’s second-quarter earnings call cited tentative organic growth among SMEs as a culprit for the sluggish spending growth, calling it an “an industry-wide slowdown,” not specific to Amex.

“The biggest thing there from a small business perspective is really the organic growth. I think organic growth has slowed,” Squeri said. “And I think small businesses grew very, very rapidly. And I think they have slowed down.”