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Economic Fears Shared by CEOs and Small Business Owners Alike

by
Julie Farless
on
6/7/2022
Economic Fears Shared by CEOs and Small Business Owners Alike

As gas and grocery prices continue to rise, the American public is wondering whether there is an end in sight. Unfortunately, according to recently-released polls of both small business owners and corporate executives, neither group is expressing much optimism for quick relief.

The Wall Street Journal reported that a poll of small business owners conducted by Vistage Worldwide, Inc., a business coaching and peer advisory firm, showed that those who are facing and hearing from customers every day in their businesses are concerned about the impact of supply chain and labor shortages, as well as rising inflation and interest rates. More than half (57%) of those polled are anticipating economic worsening in the next 12 months. An increase of 15% over the previous month. 

Similar pessimism colored the poll's confidence index from participants across the spectrum of industries. The economic outlook has not seen as steep a plunge since the spring of 2020 when the country went through its COVID-19 lockdown. Though small business owners have been forced to raise their prices, only 61% are anticipating revenues to increase. In May of 2020, two months into the pandemic, that number was 18 points higher. 

While the impact is being felt most profoundly by mom-and-pop businesses, which were severely hurt by the pandemic, the world's largest retailers are also feeling the sting, with Walmart reporting that higher product and employee costs and supply chain issues are likely to see corporate profits fall, despite rising sales. The quarterly earnings announced by Target were lower than last year's numbers as consumers shift their spending habits in response to inflation, with discretionary purchases curtailed in favor of necessities like gas and food.

Despite the facts on the ground and in the news, some small business owners are holding out hope for economic improvement. They point to continued consumer spending, low unemployment, and high demand for workers as reasons for optimism. Just over a quarter of those polled indicated that rather than worsening, things would stay the same, and 12% are predicting improvement.

Among the biggest challenges facing small business owners is the difficulty in hiring and keeping staff, and this is particularly true of those with fewer than 50 workers. Last month a survey conducted by Goldman Sachs revealed that almost 88% of the 1,100 small businesses participating indicated continuing or worsening hiring, particularly as larger organizations were able to provide more competitive salaries and perks. 

Those larger companies are having problems too, and see more on the horizon. Another poll, the quarterly Measure of CEO Confidence conducted by The Conference Board, reported a drop from last quarter's confidence score of 57 to a score of 42, which is interpreted as a negative outlook. The study revealed that 57% of corporate executives are predicting a “very short, mild recession” and that only 14% indicated a belief that conditions had improved during the quarter while 61% said it had worsened. During the first quarter, the percentage that thought things had improved was 34% and only 35% had indicated worsening.  As for improvement, those numbers have dropped from 50% to just 19%, and the number expecting things to get worse grew from 23% to 60%.

Despite a seemingly universal problem with finding qualified workers, most businesses expect that they will hire more staff in the next quarter, 91% anticipate that wages will increase by more than 3%. Plans for capital spending have definitely taken a hit, with a ten percent drop from 48% last quarter to 38% this quarter in the number of companies that expect that they will be laying out additional funds. And one in five corporate execs sees the combination of low growth and high inflation reaching the level known as stagflation. Fed Chairman Jerome Powell recently indicated that he will continue raising rates and tightening monetary policy until he sees conditions change.

If your business is being impacted by the economic downturn, seek the advice of a tax and accounting professional who may be able to help you find ways to offset your losses or boost your profits.

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Julie Farless

Julie Farless

Martinez & Shanken, PLLC is a Certified Public Accountant (CPA) firm based in Gilbert, Arizona. We provide a full range of accounting, bookkeeping, consulting, outsourcing and business services, but we specialize in tax preparation. We work with you to ensure that your personal or business processes are conducted in a manner that ensures ongoing integrity in your financial transactions. We are available to answer your questions and help with your ongoing tax planning and changing business needs.

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