Small And Medium-Sized Businesses Pessimistic About Economy: Survey

NEW YORK Alexandra Alper) - Small and medium-sized companies are increasingly glum about the chances of a pickup in growth in the U.S. economy over the next year, a survey published on Tuesday showed.

The percentage of chief executives of small companies who expect the economy to improve over the next 12 months dropped sharply to 31 percent from 50 percent last quarter, according to a quarterly survey by Vistage International, which represents small business owners.

The survey comes hard on the heels of a surprisingly weak payrolls report that showed rising unemployment in June, and added to suspicions that the economic slowdown may not be temporary.

"We are seeing a pretty substantial reversal in confidence," said Rafael Pastor, CEO of Vistage International.

He said concerns over healthcare costs, tight credit markets, slow progress on new trade agreements and anemic economic growth underlie the "growing frustration" among CEOs.

"They are seeing an economy that is going to stagnate, putter along," he said.

Confidence gains since the first quarter of 2010 have been erased, with CEOs citing customer demand as their biggest challenge.

Just half of all companies expect to grow profits in the next year, the lowest level in two years, the survey showed.

HOLDING BACK ON HIRING

Dim expectations are keeping CEOs from expanding their long-term operations -- 52 percent of those polled are holding back on permanent hires, though 49 percent said they would increase the total number of employees. That's a drop from the 54 percent who said they would add workers in each of the previous two quarters.

Only 42 percent of businesses plan to invest in new plants and equipment, lower than last quarter's 48 percent but above the 37 percent recorded in the second quarter of last year.

The CEOS were gloomier than Federal Reserve Chairman Ben Bernanke, who said on June 22nd that the economy will pick up in the second half of 2011.

Attributing the slowdown to high oil prices and companies' difficulties obtaining parts from Japan, Bernanke has said no stimulus was planned after the Fed's $600 billion bond-buying program ended last month.

CEOs were also much more negative about the current economic situation -- only 37 percent said it had improved, down from 63 percent in the first quarter.

There was some good news for workers: 66 percent of CEOs said they planned to increase wages over the next 12 months. No comparisons are available for the previous period. Hourly earnings decreased in June for the first time in a year, according to the government's non-farm payroll data released last week.

Small businesses represent the backbone of the economy, accounting for about half of gross domestic product and three-quarters of jobs, according to some estimates.

The nationwide survey, which was conducted from June 14 through June 24, included responses from 1,719 CEOs. The margin of error was 1.6 percentage points.

(Reporting by Alexandra Alper; Editing by Jan Paschal)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[Peanut Santiago]

11:35 PM on 07/12/2011

Where are the well paid American workers and customers eager to buy products and services?

Deregulation of BIG business, constant outsourcing, fewer benefits for workers, stagnant and decreasing wages, more technology resulting in the need for fewer workers.....high unemployment and underemployment.........

What did anybody expect?

The American people do NOT have the money for extras nowadays.
That means mostly spending for necessities.

No matter how cheap that big TV, nice sofa, or manicure costs, how can most Americans afford to buy at this time?

[AmosKnows]

10:56 PM on 07/12/2011

Did they increase taxes? Because I heard that increasing taxes would cause this.

[dididangerlove]

06:21 PM on 07/12/2011

My great-grandfather was a self-made multi-millionaire. He said taxes don't have anything to do with making money. He thought only whiners focused on taxes - creative people focused on making money.

[mrpotatohead]

08:12 PM on 07/12/2011

The small business owners I talk to say virtually the same thing. If we put the small business owners and small farmers in charge we wouldn't have this problem. They don't have time for the political nonsense that we are distracting ourselves with.

[oilfield]

01:39 PM on 07/13/2011

corporate taxes slow american small business growth rates. when money is taken out of the company it is taxed again anyway. we should encourage owners to keep their money in the company not to take it out.

[nofriendofrepublicans]

05:29 PM on 07/12/2011

Slim looks like he's doing ok, maybe he's eating his profits.

[lletaa]

03:42 PM on 07/12/2011

Spent my life as a restaurant owner with 3 locations serving low to mid priced meals. We need healthy, happy, prosperous consumers(customers) to succeed. Ways to achieve this are payroll tax waived for under 20K yearly income and the whopper, single payer healthcare!!! How can anyone enjoy life with this complicated,expensive mess we have that will leave you to die if your policy cap is reached. We small business owners need TRICKLE UP economics for a change, I would have a waiting list again and would put up the help wanted sigh!!

[oilfield]

01:39 PM on 07/13/2011

so what do you think single payer would cost americans?

[mrpotatohead]

02:24 PM on 07/13/2011

The other question is, what will it cost Americans if we don't do it.

We are moving to an economy of part-time, flex-time, short-term, temporary employees. To have insurance tied to employers doesn't make sense.

We need mobile workers and we also need to remove the health-care risk that entrepreneurs take by starting out on their own.

[lletaa]

02:34 PM on 07/13/2011

I think Americans would save money from what we have now, and all statistics from other nations that have universal healthcare prove it. A healthy consumer(customer) without the fear of living on the street if a health issue occurs would be good for small business.

[kemcha]

03:30 PM on 07/12/2011

It's about time that businesses started to realize that the Fed and the economists have been lying about the actual economy and the employment numbers ...

[smoker]

03:34 PM on 07/12/2011

Businesses always knew that from their sales. They don't rely on the Feds or the Economists or even the GOP/DEM to tell them that.

[Basselope]

02:09 PM on 07/12/2011

Fact: Income taxes do not play a roll in hiring decisions.

[lipps]

02:39 PM on 07/12/2011

No but Payroll, workmans comp and soon to be implimented obama care do.

[Basselope]

02:59 PM on 07/12/2011

"Obama Care" has been proven to cost businesses LESS, since health care now = a tax credit as well as a deduction.

And no, no one makes hiring decisions based on the paltry amount of payroll taxes or workmans comp.

[oilfield]

01:40 PM on 07/13/2011

depends on cash flow...if you have to pay 25k or 50k quarterly and cash flow is bad, you wont hire.

[Basselope]

02:07 PM on 07/13/2011

Oh please. Get real.

If your cash flow is bad you aren't hiring anyway, because you are obviously not seeing enough demand.

Since 50% of the quarterly payment is money you WITHHELD from people's check, you shouldn't be spending it anyway.

If you run a smart business, you put aside the payroll taxes into a savings account the moment you write the paycheck and earn interest on the government's dime... OR you set up a payroll company that pays them monthly like we do, so we don't have to deal with it.

Either way... payroll taxes have 0 bearing on hiring. If you reduced them to 0, it wouldn't create a single job because they aren't part of the consideration.

[mjtaylor22]

02:08 PM on 07/12/2011

the republican plan of creating uncertainty in our economy and inthe ability of the govt to continue to function....is working......

[oilfield]

02:51 PM on 07/12/2011

gop creating uncertainty? really?

[gemini68]

03:25 PM on 07/12/2011

Absolutely.

[nofriendofrepublicans]

05:28 PM on 07/12/2011

That's been their plan since Obama was elected. Where have you been?

[scottymac11]

01:23 PM on 07/12/2011

The vast majority of these small businesses require patronage from regular middle class people who the republican'ts have squeezed dry and sold out. Then they left them behind for the big money folks.

[Tom Hendricks]

12:26 PM on 07/12/2011

This could change with enough of these businesses joining other businesses in a National Hiring Day. It's a grass roots idea to get people back to work and to help the country.

http://wp.me/p5S9X-nv

Let's say you run a business, by hiring one person, you are a part of this. Many others hire one or more. Then because you (and others) hired one or more, thousands have gotten jobs, lost insecurity and worry, and are ready to buy from you and others. AND they have a good reason to support your company. Just one hire from enough businesses and the whole country has a big boost. You help a little and get good will from thousands that find jobs, in return.

Corporations are sitting on a lot of profit - all time highs - and they are ready to hire, but scared to stand out and be the first. A national Hiring Day would help them by getting many on board.

[SamCooper]

12:41 PM on 07/12/2011

No one's afraid to be the first to hire! If the new employee can deliver more in revenue to a company than he/she costs in wages and overhead, a company will most likely hire. They will not hire an unnecessary employee as part of a feel-good campaign (despite what some might have told you).

[Tom Hendricks]

02:02 PM on 07/12/2011

How do you spin a hatred for the country if you are a corporation that can't even hire one person? Doesn't that mean you are going out of business anyway? Most corporations have gotten quite a lot from this country. They are doing fine. Time for them to give back - and to help themselves as well when they help others.
Let's say you run a small business, by hiring one person, you are a part of this. Many others hire one or more. Then because you (and others) hired one or more, thousands have gotten jobs, lost insecurity and worry, and are ready to buy from you and others. AND they have a good reason to support your company. Just one hire from enough small businesses and the whole country has a big boost. You help a little and get good will from thousands that find jobs, in return.

[mjtaylor22]

02:09 PM on 07/12/2011

u are mis informed....if they expected growth. they wld hire....

[AlonzoQuijana]

12:01 PM on 07/12/2011

One problem small business has -- and this article did not touch upon -- is state and local regulations. In my city, you have to hire expensive "expediters" to pull permits and get the many, many inspections and approvals needed to open your doors. (I helped a friend open a spa / salon). If you do not get an expediter nothing will happen: calls not answered, permits languishing, negative inspections (if you can even get one).

You tie up a lot of money in a project -- or borrow -- and guess what, it sits empty for months unless you placate city and county halls. Meanwhile, you have the opportunity cost of your money or interest and nagging bankers.

[mjtaylor22]

02:11 PM on 07/12/2011

regulation protects consumers from fraudulent businesses. gotta paty for the rihgt to do biz in a well organized state

[lipps]

02:41 PM on 07/12/2011

Not really, regulations are just a make work program for the most part for government workers.

[oilfield]

02:54 PM on 07/12/2011

red tape is good for america....liberal thought....we would hate for someone to get a bad haircut and feel obligated to return to keep them in business.

[AlonzoQuijana]

11:56 AM on 07/12/2011

I see a lot of Progressives here quoting Jeff Imelt, the CEO of GE. That's rich. This guy has exported tens of thousands of U.S. jobs and paid no U.S. income taxes last year.

He knows nothing about small business. His little lecture is not appreciated.

[SamCooper]

12:06 PM on 07/12/2011

Their hero because Obama endorsed him.

[Arts4u]

05:22 PM on 07/12/2011

There are no heros actually. Great that he opened his mouth though.... even though GE is a major outsourcer and pays little in taxes.

Something has to give in order for the economy to turn.... and businesses hold the key to it. Just hoping that they won't be so pathetic as to demand... you know....the usual. What a shame that people, small business, as well as the economy are being held hostage by large business.

[oilfield]

02:55 PM on 07/12/2011

obama believes imelt.....ge's motto is to fire the bottom 10%......hence 9.2% unemployment....
see o and imelt are on the same page.

[Basselope]

11:50 AM on 07/12/2011

With the GOP fighting so hard to stop the government from getting enough revenue to create a proper jobs bill, how could they be confident?

[SAHD-Rydawi]

11:46 AM on 07/12/2011

If I were a small business owner I would also be cautious with money and hiring because of the uncertainty of the government taking more of my money through taxes.

[Basselope]

11:48 AM on 07/12/2011

You do realize what you said makes no sense.

Taxes are on money left over AFTER expenses, like employees.

[SamCooper]

11:54 AM on 07/12/2011

Not true in some major cities, such as Philadelphia, where the city taxes gross revenue.

[Ronald Malaney]

01:09 PM on 07/12/2011

if you are audited by the irs nothing is an expense. even employees.

[olephart]

11:52 AM on 07/12/2011

So rather than take a chance on paying a percentage of your profits in taxes you would rather have nothing. This is the sort of thinking that leads to voting Republican.

[SamCooper]

11:54 AM on 07/12/2011

Ever run a business/

[SamCooper]

12:36 PM on 07/12/2011

"I sold my real estate holdings in November, 2006 at the top. I have recently re-entered the market. In my position of employment­, as a VP we have doubled our workforce this year. Our sales have more than doubled in two years. Prosperity awaits those who are prepared. We plan for success not failure. "

You're in Sales, right? :)

[olephart]

11:39 AM on 07/12/2011

Throughout this recession the number one complaint from small and medium sized businesses is lack of demand. It’s not regulations, taxes, the ability to borrow or uncertainty it’s a dearth of customers. Everything that is held up as an impediment in the National press is hogwash.

Interestingly the NIFB chart of optimism plunged in 2007 and 2008 and recovered when Obama was sworn in. It continued to rise until after the 2010 elections. Now that Republicans have stymied further action on the economy this optimism is falling.

http://www.nfib.com/research-foundation/surveys/small-business-economic-trends

It would seem that despite the propaganda praising our Republican friends the reality is different. This has been the case for almost a hundred years. The stock market does considerably better under Democratic rule than under Republican rule.

http://www.investopedia.com/articles/financial-theory/08/political-party-democrat-republican-stock-returns.asp#axzz1Ru8sVLTs

Indeed that is true even as Obama is pummeled for being unfriendly toward business the Dow Jones has advanced 56% since his inauguration. It is true that the stimulus was unfocused, compromised with tax cuts and wholly inadequate but the results speak for themselves. The recession ended 4 months after its implementation and job growth though anemic has continued. Now in its absence the economy is faltering despite a continuation of Republican tax cuts. Thus the choice is clear, Democrats bring economic prosperity and Republicans bring economic sorrow.

[Ronald Malaney]

01:26 PM on 07/12/2011

I make, water treatment systems,turbine engine tools, construction tools, boat parts, prototype parts for other industries. lack of demand is one of my main problems, but the oil drilling ban, logging ban, energy blockades, mining bans, treasure hunting ban, ranching bans,ect, cause this. then the threat of the man going after these industries to wring more money out of them, keeps them doing only what they have to not what they want to.