That’s the word from respondents to the semi-annual survey by PNC Bank.
Thirty-seven percent of respondents expect increased sales in the next six months, versus 54 percent in the prior survey in April. Eighteen percent expect sales to decline, compared to 12 percent six months ago.
Twenty-nine percent expect higher profits, compared to 39 percent in April, and 23 percent expect lower earnings, versus 20 percent in the previous PNC survey.
Expectations for hiring held steady from the spring to the fall, with 17 percent planning to add staff and 73 percent maintaining their present workforce.
The results reflect a sluggish U.S. economy, high unemployment and low job growth, low consumer confidence and uncertainty over the presidential election, PNC economist Kurt Rankin said.
The findings are also more consistent with the spring results than what PNC found in other states, which signifies that small business owners coming out of Michigan’s economic malaise of the last decade have had comparatively lower expectations for the future for both the state and national economies.
While their counterparts elsewhere started the year with higher expectations and are now significantly pulling back, Michigan small business owners have operated that way for some time “after having gone through a much deeper recession and survived and emerged from the other side,” Rankin said. They have planned accordingly for the next six months and were ready for the easing of the U.S. economy, he said.
“It speaks to small business owners’ state of mind coming out of the recession. They have lower expectations but better planning as a result,” Rankin said.
Rankin said business owners did sufficient planning in the previous six month such that a slower second quarter and high unemployment rate didn’t disrupt their plans for the rest of the year.
Survey respondents generally view the economy as “we’re not going to be booming anytime soon, but we are back on our feet and we have to plan accordingly and be conservative until the rest of the U.S. economy is also back on its feet,” he said.
Hanging over the economy is the uncertainty of the presidential election and the so-called fiscal cliff, a combination of deep federal spending cuts and expiring tax cuts that take effect Jan. 1 unless Congress acts, Rankin said. Whoever wins the election should ease some of the uncertainty, since businesses will at least know what federal economic and fiscal policies to expect for two years, he said.
“The election on Nov. 6, I think, really does have the potential to free up a lot of uncertainty that has been holding us back for the past two years,” Rankin said. “We know who will be in office and what policies will be governing the U.S. economy, so businesses can start actually planning.”
PNC Bank’s findings generally align with the results of the monthly survey of industrial purchasing managers in West Michigan that shows flat economic activity in Grand Rapids and Kalamazoo.
“Because we have been reporting a relatively slow economy for many months, the fact that the economy has now turned flat will probably go unnoticed by most people on the street. After four years of economic weakness, it seems as though a flat or weak economy is simply becoming the new norm for many people,” economist Brian Long wrote in his monthly reports on both the Kalamazoo and Grand Rapids areas.
Among key indexes in the Grand Rapids area, sales and production dipped into negative territory for September and indexes for purchases and employment declined, but remained in positive territory, said Long, director of supply chain management research for Grand Valley State University’s Seidman College of Business.
In the Kalamazoo area, indexes for sales, purchases and employment improved in September over August, although Long said the data still reflect a flat economy.
Views on the local and national economies were relatively unchanged among respondents to PNC’s survey. Twelve percent of respondents feel optimistic about the local economy, compared to 13 percent six months ago, and 45 percent were pessimistic, two percentage points more than in April.
Seven percent were optimistic about the national economy and 54 percent were pessimistic. Both are one percentage points higher than six months ago.