Enterprise confidence trails markets, economic system
President Joe Biden greets workers during a visit to WS Jenks & Son hardware store in Washington, DC, the United States, on Tuesday, March 9, 2021.
Yuri Gripas | Bloomberg | Getty Images
Small business owners in the US are more confident, but hardly, as fears of price inflation, hiring costs, tax hikes and partisan policies weigh on Main Street as it shows signs of a return to normal before Covid.
Nearly two-thirds (64%) of business owners say their business can survive for more than a year under current terms and conditions, up from 55% in the last quarter as the wave of closures and bankruptcies that hit many Main Street businesses , wears off and the country is born from Covid – new cases that are reported have now fallen below 30,000 and more than 100 million Americans are fully vaccinated.
According to the CNBC | Second Quarter SurveyMonkey Small Business Survey, in which the Small Business Confidence Index rose from a record low in the first quarter to 45 in the current quarter, more business owners (34%) rate current business conditions as good. However, that’s still below 50 and a negative net sentiment that first appeared for the five-year-old survey a year ago in the second quarter of 2020 when the Covid outbreak spread.
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“In the middle, trustworthy is appropriate because there are many unknowns before recovery,” said Karen Kerrigan, president of the Small Business & Entrepreneurship Council. “A lot of people are still digging … paying the rent back and getting sales back to normal,” Kerrigan said.
The percentage of business owners who forecast sales will decline next year has fallen from 27% a quarter ago to 18% now – yet less than half (46%) expect sales to grow.
Biden’s Infrastructure Plan and Main Street
US GDP is booming, several rounds of economic reviews have boosted consumers, and President Biden’s infrastructure plan and spending priorities are set to boost the economy. On Main Street, however, views are mixed about the president’s ambitions and partisan factors in the poll’s responses.
Just over half (51%) of small business owners support Biden’s infrastructure legislation, but there is a party-affiliation divide on Main Street and small business owners’ overall support for the plan is less than there is among the general public.
Almost all (97%) of small business owners who identify as Democrats and Democrats support the American employment plan, but that’s 55% of Independents and 23% of Republicans and GOP.
Small business owners share the tax policy needed to fund the infrastructure plan. 39% of entrepreneurs agree to pay the American employment plan by increasing the corporate tax rate from 21% to 28%, while 59% oppose it. Here, too, the division among the partisans is wide: 85% of Democrats and Democrats, 38% of Independents, and 13% of Republicans and GOP supporters are in favor of a corporate tax increase.
“We view this as a fragile recovery, and these proposals certainly bring a little more uncertainty,” said Kevin Kuhlman, vice president of federal government relations for the National Federation of Independent Business. The latest survey found that small business confidence has returned to historical averages after having been below that level for almost a year.
Certain industries in the small business community should benefit from infrastructure spending like construction and internet services, but President Biden’s alignment with the unions in terms of the jobs to be created under the plan can dampen many small business’s expectations that opportunities will arise for them. “Most companies are not union companies,” Kerrigan said, although she added that most are positive about infrastructure spending.
Fear of inflation, attitude
As companies try to get back to normal, the search for workers and problems in the supply chain remain a headwind to operating at full capacity.
A quarter of small businesses expect their workforce to grow from 19% in the last quarter to 24% next year, but 24% have vacancies that have not been filled for at least 3 months, up from 16% in the first quarter of 2020 (the last time in 2020) Survey of interviewed entrepreneurs on this question.) The economic upswing can be observed in the sector hardest hit, the accommodation / catering service, where 34% have vacancies and 31% expect more employees in the next year adjust. More than half (53%) of entrepreneurs in the accommodation / catering sector expect sales to increase in the next 12 months, while only 13% expect a further decrease.
However, during a corporate earnings season when CEOs and CFOs debated at length about inflation and commodity prices, Main Street is also concerned about a price squeeze that comes alongside government pressure for higher corporate taxes and a higher federal minimum wage. Just under half (48%) of small business owners say that raw material costs will increase the most in the next six months (compared to labor costs and capital costs), with cost costs no.1 up to 79% below those in mining and capital in construction.
“These are real things that make a difference in business and operations,” said Kerrigan. Global supply chain problems that have hit businesses of all sizes and the battle for new suppliers have combined with inflation to limit the ability of the small business sector to return to pre-pandemic confidence levels. “They feel squeezed because they can’t raise prices and all the talk about inflationary potential is affecting confidence and the size of their investments,” she added.
The influence of personal politics on small business sentiment is evident in survey responses on immigration.
The shift in management has resulted in a secular shift in the attitudes of small Republican business owners towards tax, regulatory and immigration policies, which are core factors in dampening the Small Business Confidence Index. Republican confidence rose from 32 to 35 (down from 57 in the quarter leading up to the 2020 election).
Meanwhile, 41% of small business owners expect changes in immigration policy to negatively impact their business in the next 12 months, up from 36% in the first quarter and 17% a year ago. Overall, 17% of SOOs say immigration is the issue they care most about right now, up from 5% who said there was an increase in the first quarter that led immigration to adopt health policies in the Q2 survey, was seen as the most important problem on Main Street behind Jobs and Economics. Over a quarter of Republicans (27%) consider immigration to be the most important factor, compared with 9% of Independents and 3% of Democrats.
The current crisis on the country’s southern border and the surge in migrants has been a challenging headline for the administration, but small business experts say partisan policies are the likely explanation for this shift, more than the actual business impact. In fact, Kerrigan noted that for the past two decades, small businesses in general have implemented pro-immigrant reform and Trump’s immigration policy has been a net negative for Main Street. Kerrigan said small business owners may also be disappointed that Biden has yet to take further action to fix a broken immigration system that is making it difficult to get a work visa.
CNBC’s online poll | SurveyMonkey was conducted April 19-26, 2021 using the SurveyMonkey platform among a national sample of 2,201 self-identified small business owners aged 18 and over. For the quarter, the study also included results from 9,225 people who don’t own small businesses.