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PNC Economic Outlook Survey: Small Business Owners Expect Growth
in Hiring and Sales; Planning To Exercise Pricing Power To Counter Rising
Business Costs
-- Healthcare and tax reform top Social Security among national issues --
PITTSBURGH, March 31 /PRNewswire-FirstCall/ -- Nationwide expectations of
rising sales are prompting a growing number of small- and mid-sized business
owners to make plans to increase hiring and raise salaries, according to the
biannual PNC Economic Outlook, commissioned by The PNC Financial Services
Group, Inc. (NYS: PNC).
(Photo: http://www.newscom.com/cgi-bin/prnh/20050331/CLTH012 )
While optimistic about their outlook for sales, profits and hiring during the
first half of 2005, business owners said they do plan to exercise pricing power
to counter rising costs for supplies, health care and higher interest rates. In
another survey highlight regarding federal legislative issues, respondents
rated healthcare reform as the most preferred issue to be addressed this year,
followed by tax reform, budget deficit reduction and Social Security reform.
The PNC Economic Outlook survey was conducted in late January through early
March with responses from approximately 1,600 business owners and executives
nationwide. The survey, conducted every six months since Spring 2003, gauges
their mood and sentiment about business expectations and issues.
"The most recent PNC Economic Outlook national survey results indicate the
economy remains on a path of steady growth," said Stuart Hoffman, chief
economist for PNC. "Owners are feeling bullish about their own business
performance based on their ability to manage through external factors such as
rising expenses for energy, interest, health care and materials, which also
represents a precursor to rising inflationary pressures."
Survey's Key Findings
Conducted by Harris Interactive Inc., a global market research firm, the survey
reveals the following results:
Owners' Outlook for Business Performance: The outlook on sales, profits and
hiring during the first half of 2005 has reached its highest level since the
survey began in March 2003.
- Sales: 70 percent expect increases (up 17 percent from last fall), 23
percent expect no change (down 13 percent), and 5 percent expect
decreases (down 5 percent).
- Profits: 59 percent expect increases (up 7 percent from last fall), 30
percent expect no change (down 6 percent), and 10 percent expect
decreases (down 1 percent).
- Hiring: 33 percent expect increases (up 8 percent from last fall), 63
percent expect no change (down 6 percent), and 4 percent expect
decreases (down 2 percent). At the same time, 62 percent said they
expected to increase employee salaries. Compared to one year ago, only
21 percent expected to add full-time personnel and 50 percent said they
would give pay raises.
"These new results show that more business owners are finally feeling confident
enough to make plans to hire more employees to support the anticipated growth
in consumer demand and sales," said Jeffrey Schmidt, who oversees PNC's small
business banking division. "Rising healthcare costs remain a big concern, but
business owners are not going to let this issue prevent them any longer from
adding personnel and paying bigger salaries to retain and attract employees in
a tightening labor market."
Owners' Outlook for the Economy: Lingering concerns about issues that could
negatively impact their business caused a small dip in the survey respondents'
outlook for the U.S. economy as a whole. In the newest results, the issues
expected to have the greatest negative impact on their company's performance
are rated as follows: likelihood of interest rate hikes (26 percent),
cost/availability of health insurance (24 percent), higher energy prices (18
percent) and possibility of higher inflation (17 percent).
- U.S. Economy: 20 percent are optimistic (rating 8-10 on a scale of 1 to
10) and 61 percent are moderately optimistic (rating 5-7) about the
national economy through June. This compares to last fall when 30
percent were optimistic and 53 percent were moderately optimistic.
- Local Economy: 26 percent are optimistic (rating 8-10 on a scale of 1
to 10) about their area economy and 54 percent are moderately
optimistic (rating 5-7). This is the same as last fall when 26 percent
were optimistic and 54 percent were moderately optimistic.
The owners' dip in optimism about the prospects for the U.S. economy is
influenced by their escalating concerns about costs of doing business. The
majority, however, plan to pass along some portion of these cost hikes to their
customers via higher prices.
- Supplier Charges: 67 percent expect increases - up 13 percent from last
fall. Meanwhile, 28 percent expect no change (down 9 percent), and 3
percent expect decreases (unchanged).
- Healthcare Costs: 71 percent expect increases (up 20 percent from last
fall), 23 percent expect no change (down 14 percent), and 3 percent
expect decreases (up 2 percent).
- Prices Charged Customers: 50 percent expect increases (up 16 percent
from last fall), 45 percent expect no change (down 11 percent), and 4
percent expect decreases (down 2 percent).
Owners' Outlook on National Issues: Business leaders rated healthcare reform
first (32 percent) followed by tax reduction (29 percent) then budget deficit
reduction (19 percent) as the most preferred U.S. legislative issues they want
addressed this year.
- Social Security reform: Just 14 percent rated this issue as a top
priority among the list of federal issues. While it is not viewed as a
top priority, the proposal most favored by survey respondents was
partial privatization (49 percent) followed by reducing benefits for
higher income retirees (36 percent) and raising the retirement age (22
percent). Fourteen percent said to keep the system as it is.
All respondents in the PNC Economic Outlook survey were owners or senior
decision makers in their respective businesses. Harris Interactive Inc.
conducted 1,671 telephone surveys with 501 businesses nationally and 1,234
businesses within PNC Bank's primary region. The margin of error for the
overall results is +/- 3 percent and the margin of error for the national
results is +/-5 percent.
Harris Interactive Inc. ( http://www.harrisinteractive.com/ ), the 15th largest
and fastest-growing market research firm in the world, is a Rochester,
N.Y.-based global research company that blends premier strategic consulting
with innovative and efficient methods of investigation, analysis and
application. Known for The Harris Poll(R) and for pioneering Internet-based
research methods, Harris Interactive conducts proprietary and public research
to help its clients achieve clear, material and enduring results.
The PNC Financial Services Group, Inc. is one of the nation's largest
diversified financial services organizations providing consumer and business
banking; specialized services for corporations and government entities,
including corporate banking, real estate finance and asset-based lending;
wealth management; asset management and global fund services.
This report has been prepared for general informational purposes only and is
not intended as specific advice or recommendations. Information has been
gathered from third party sources and has not been independently verified or
accepted by The PNC Financial Services Group, Inc. The PNC Financial Services
Group, Inc. makes no representations or warranties as to the accuracy or
completeness of the information, assumptions, analyses or conclusions presented
in the report. The PNC Financial Services Group, Inc. cannot be held
responsible for any errors or misrepresentations contained in the report or in
the information gathered from third party sources. Any reliance upon the
information provided in the report is solely and exclusively at your own risk.
http://www.newscom.com/cgi-bin/prnh/20050331/CLTH012
http://photoarchive.ap.org/
DATASOURCE: The PNC Financial Services Group, Inc.
CONTACT: Patrick McMahon of PNC Financial Services Group, Inc.,
+1-412-762-2477, or
Web site: http://www.pnc.com/
http://www.harrisinteractive.com/
Company News On-Call: http://www.prnewswire.com/comp/701257.html