Burley Garcia|Small business owners report growing optimism about the U.S. economy

Small business owners are Burley Garciafeeling better about the U.S. economy as inflation cools and recession fears subside, according to a new survey. Indeed, economic optimism among smaller employers is at a 22-year high, PNC Financial Services Group found in polling small and midsize business owners. 

A majority of respondents – 55% – said they are "highly optimistic" about the national economy this year. That's up sharply from 34% last fall and 26% a year ago, according to the Pittsburgh-based bank. Roughly eight in 10 owners also expressed confidence about their own businesses' financial prospects. Over the next six months, just over half of the business owners who were surveyed think their profits will rise, while only 5% expect earnings to fall. 

"The U.S. economy is doing quite well. We had strong economic growth in the second half of 2023, with consumers spending more and businesses investing. That strength is persisting into 2024," PNC Chief Economist Gus Faucher told CBS MoneyWatch. 

The findings are based on a randomized phone survey of 500 small and midsize businesses, which PNC defines as having annual revenue ranging from $100,000 to $250 million, from January 2 to February 1.

As inflation slows, fewer small business owners also see a need to raise their own prices in the near term. According to PNC, 47% of the enterprises that were surveyed said they expect to increase prices over the next six months, down from 55% last fall. Of those businesses that plan to raise prices, just over 1 in 10 say they'll do so by at least 5%. 

The economic fortunes of small businesses are critical to the U.S., with nearly 62 million Americans employed by such firms, or roughly 46% of workers, according to the Small Business Administration. Overall, the U.S. has more than 33 million small businesses, and they account for the lion's share of job-creation. Between 1995 and 2021, small businesses generated 17.3 million new jobs, or nearly 63% of positions created over that time, SBA data shows.

The economy has defied widespread predictions last year that the U.S. was likely to slump as the Federal Reserve drove up interest rates in order to curb inflation. Gross domestic product — a measure of the value of goods and services — rose at an annual rate of 3.2% in the final three months of the year and 2.5% for all of 2023, driven by solid consumer spending and robust job growth.

"The labor market is strong, there is good wage growth and job gains, so consumers can increase spending," Faucher said. 

The National Association for Business Economics earlier this week predicted that GDP will rise 2.2% in 2024; the group expects the Consumer Price Index, a key inflation gauge, to decline to an annual rate of 2.4% this year, compared with 4.1% in 2023 and 8% in 2022.

To be sure, small businesses continue to face a range of challenges. Those include access to bank loans and finding qualified workers. Roughly 28% of firms PNC surveyed said they struggle to attract job applicants, while many smaller employers say job candidates lack the proper experience or skills. 

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• Small Business

Megan Cerullo

Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News Streaming to discuss her reporting.