Small and medium-sized Florida businesses are feeling the after-effects of the recession more than most other areas, according to the PNC Economic Outlook survey’s newest findings. And this is consistent with the greater concentration of construction employment in Florida compared to most other states.
According to the survey findings, the construction industry has largely stabilized after the downdraft of the Great Recession, but it remains on the lagging edge of the economic recovery. As owners across all industries await sales growth, some are planning to raise selling prices to preserve profits in the face of widespread higher non-labor costs. These survey findings support the PNC economists’ forecast that the U.S. economy is transitioning to a self-sustaining economic expansion in 2011-2012 that will not be derailed by higher energy prices, Europe’s sovereign debt problems or the disaster in Japan.
Private sector job growth nationwide, especially among small businesses, is essential to this type of recovery. For December 2010 and January and February 2011, U.S. private industry jobs rose by 152,000 per month and the ADP employment reports show job growth picking up at smaller firms. Florida has not yet shown consistent monthly job gains but we expect hiring to improve through the course of 2011. New findings from the PNC survey, which began in 2003, support additional job gains at small firms, which do the lion’s share of hiring.
Other key findings from the the PNC Economic survey findings are:
The Florida economy is stabilizing after a brutal recession but conditions have not yet improved enough to fuel significantly greater optimism for small and mid-sized business owners.
- Optimism about Own Company: Just over one-fifth (21%) remain optimistic about their own company’s prospects during the next six months, improved from our Autumn 2010 survey (14%), but matching results from one year ago. Just under one-third (30%) are pessimistic which also matches our Spring 2010 results.
- Hiring Outlook Still Weak: 15% expect to hire full-time employees during the next six months, down slightly from last Autumn and Spring (both 18%). 12% plan to reduce full-time staff, slightly more than Autumn 2010 (8%), but on par with Spring 2010.
- Price Pressures Remain Cool: About one in four (23%) plan to raise their selling prices and 15% intend to cut their prices, which is a little more pricing pressure than we saw in the Autumn 2010 survey. However, business conditions remain slack enough to keep price pressure in Florida well below what we are seeing in the national results where 37% plan to raise their selling prices.
- Inflation Expectations on the Rise: Over three quarters (77%) expect consumer prices to rise in 2011, up significantly from Autumn and Spring 2010. A scant 2% expect consumer prices to fall this year.
- Higher Energy Prices Will Restrain Growth: Nearly four out of five (79%) say that a sustained rise in energy prices would have a negative impact on their business.
- Capital Spending and Credit Access Rise: 44% plan to increase capital spending, just below the 50% from last Autumn. Technology equipment spending leads the list of priorities. In terms of access to financing, 7% say it is easier to obtain credit, 26% say it’s neither easy nor difficult and 47% say it is more difficult than three months ago.
- Own Business vs. U.S. Recovery: More owners report noticeable improvement in their own business performance. Almost one fourth (23%) say their business was never hurt or has already improved, well above the 14% from Autumn 2010. 21% now expect noticeable improvement within one year while 53% say more than a year away. In contrast, the overwhelming majority (88%) says the U.S. economy has not begun to improve. 65% say the start of a U.S. recovery is more than one year away.
- Full Business Investment Expensing in 2011: Only 42% report being aware of the full expensing of business investments in 2011 included in the Small Business Jobs and Credit Act of 2010. Of those aware, only one out of four said this policy will cause them to increase their business investment in 2011.
