Survey finds businesses less fearful of recession
Recession worries have generally abated among owners of small and mid-size U.S. businesses, according to a new Bank of America survey report that points to relative optimism in the face of lingering concerns about election-year politics, inflation and higher interest rates.
The brighter sentiments compared with last spring are in line, a local representative of the bank said, with feedback from businesses around Central California and Kern County, where she said entrepreneurs — especially in health care and the restaurant industry — are anxious to expand amid positive business conditions.
“They’re projecting growth in their revenues and (report) we’re outpacing some of those (national) averages in our Bakersfield businesses alone,” said Diandra Ko, a small business banking manager for Bank of America who covers Central California from her office in Bakersfield.
The survey results, which came after a sharp downturn during the pandemic followed by a strong recovery, suggest business owners are shaking off fears of another slowdown. They are predicting greater revenue in the year ahead and making plans to borrow money for expansion, including through investment in artificial intelligence.
Based on responses from more than 1,400 companies nationwide, the report concluded confidence was stronger among mid-size businesses, defined as companies with annual sales of at least $5 million but less than $50 million. Larger companies were not included in the survey.
About six in every seven midsize companies indicated they anticipate their revenue will grow this year, as compared with last year, while about two of every three small businesses expressed
the same expectation, according to the report released last week.
It found three-quarters of midsize businesses surveyed expect the national economy to improve during the next 12 months, while just a third of small business owners felt the same.
Eighty percent of mid-size companies expressed plans to expand in the year ahead, while 69% indicated they plan to hire. The share reporting their 2023 revenues beat 2022’s total was 84%.
The segment’s top concerns, according to the report, were the U.S. political environment, followed in order by inflation, supply chain problems and consumer spending.
By comparison, just 39% of U.S. small businesses stated they plan to expand by next spring, and 30% expect to hire. Fifty-five percent reported higher revenues in 2023 relative to 2022.
Although small business also cited the national political environment as their top worry, their next most common concerns were inflation and health-care costs, followed by interest rates.
The two segments mostly agreed on the risk of recession, with 61% of mid-size companies, and 56% of small businesses, citing concerns of an economic contraction. A year ago, the figure was 72% among both categories.
Their perceptions of artificial intelligence varied, according to the Bank of America report, with 89% of mid-size companies indicating they plan to implement the technology to streamline payroll, bookkeeping and hiring. That compared with just 37% of small businesses expecting to begin using AI.
Bakersfield small-business owner Olivia Snider of Snider’s Inc., which has cyclery and locksmith businesses, said she sees greater volatility in the market lately, making it hard to predict how things will go in the next year. One trend she has noticed is that customers are buying fewer new bicycles and instead purchasing accessories and paying for maintenance.
While her approach so far has been to remain conservative about her business investments, because she suspects there’s still a chance of recession as consumers deal with inflation, Snider said she has invested in product inventory. She also expects to do some hiring in the near term.
“I’m trying to stay lean but also take advantage of opportunities out there, as well,” she said.
“Ultimately it’s good,” she said. “I feel like Bakersfield is definitely a community that, we like to support small business and we like to support those who are trying to make a different within the community.”
Across Central California, Ko at Bank of America said she hears small business owners expressing greater caution than mid-size companies about conditions toward the end of this year.
Business people she interacts with seem more resilient after having made it through the pandemic, she added, as they look to do more with technology, such as making customer service more easily accessible.
“They made a lot of changes in their business,” she said.
Another helpful outcome of the pandemic that has benefited business in Kern County, Ko said, has been the influx of residents from Southern California. Restaurants have opened or expanded locally as a result, she said. At the same time, healthcare professionals have been looking at building new medical office buildings in order to keep up with demand, she said.
“A lot of doctors in our area that want to grow their offices, bring in more health-care workers, but were continuing to hunt for that real estate that in a lot of areas are not available,” Ko said.