Small business confidence improves after debt ceiling dip [WSJ/Vistage June 2023]
After the uncertainty of the debt ceiling status that impacted small business confidence in May, the June WSJ/Vistage Small Business CEO Confidence Index increased 6.5 points to reach 79.8, returning to the level recorded this past March.
While all six components that comprise the WSJ/Vistage Small Business Index increased from last month, most notably there is a lessening in pessimism about the U.S. economy’s future. The proportion of small businesses that believe the economy will worsen in the next 12 months declined 13 points from last month to reach 44%.
Sentiment about revenues and profits improved from last month, and disinflation is evident in profitability expectations as they have rebounded from last month; 43% report expectations for improved profits in June compared to last month’s 36%. Revenue expectations rebounded after a dip last month as well, with 53% expecting increased revenues and 15% expecting decreased revenues. As ITR Economics has noted, different industries are in different cycles.
Expansion plans remain conservative but have not declined following last month’s dip. While one-third (33%) of small businesses report they have delayed hiring in the last 6 months, 48% plan to expand their workforce in the next 12 months and just 7% report plans to decrease the size of their workforce. Higher interest rates and tightened lending standards continue to put a hold on fixed investments and capital spending for small businesses in the year ahead. More than half plan to delay (53%) or reduce (52%) capital spending this year.
Highlights of the data — informed by 671 leaders of small businesses that responded to the Q2 Vistage Small Business CEO Confidence Index survey in the field June 5-12, 2023 — include:
- Current Economy: 14% of small businesses said the economy improved from last year, while 49% said it worsened.
- Future Economy: 12% of small businesses expect the economy to improve in the next 12 months, while 44% expect it to worsen.
- Revenue projections: 53% of small businesses expect increased revenues in the next 12 months, while 15% expect revenues to decrease.
- Profitability projections: 43% of small businesses expect increased profitability in the next 12 months, while 23% expect worsening profits.
- Fixed investment plans: Less than one-third (30%) of small businesses plan to increase fixed investments, while 17% expect to decrease investments in the next 12 months.
- Workforce expansion: Just under half (48%) plan to increase their workforce, while just 7% report their workforce will decrease over the next 12 months. One-third have delayed hiring over the last 6 months in response to cost-cutting measures.
In addition to the six components that comprise the WSJ Small Business Index, the survey captured small business sentiment on how they are addressing hiring and cost management, which are top areas of focus for small businesses:
- One-quarter of small businesses are currently using ChatGPT; an additional 23% are testing it while 30% are not using or testing it at all.
- In terms of cost management, small businesses are delaying hiring (33%) and sourcing new vendors and suppliers (37%), with over a third (33%) planning to sunset unprofitable products and services in the future.
- Retention rates continue to improve with 19% of small businesses citing improvements and 69% reporting stable retention rates this year.