The credit crunch gripping global markets, high energy prices, inflation and fears of recession have stoked business owners' pessimism to a record high, according to a twice-yearly survey by The PNC Financial Services Group.
The availability of credit -- the lifeblood of companies' operations, payrolls, and investment -- is among the biggest headaches for owners of small and medium-sized firms, the survey reported on Oct. 2.
Despite healthy second-quarter economic growth and tens of billions of dollars in tax rebates, "pessimism among the nation's small and mid-sized business owners is at a new all-time" since 2003, when the economic outlook survey was launched, PNC said.
PNC said the survey results supported its forecast for the remainder of 2008 that shows the U.S. economy "remaining stuck in a recession that lurks just below the shiny surface" of the government's estimate of second-quarter percent annualized growth of 2.8%.
"Consistent with reports of credit market tightening, owners indicate it is more difficult to obtain credit," PNC said. Twenty-five percent, or one in four owners, said it was more difficult now than it was three months ago, up sharply from 18% in the spring survey. Seven percent said it was easier to get credit, half the number than in the prior survey.
PNC said that nearly one in three (29%) of those surveyed were pessimistic about their own company's prospects during the next six months, compared with 21% six months ago. In the year-ago survey, 10% felt that way, PNC said.
Seventy-four percent said they foresaw the possibility of higher energy prices having a negative effect on their company during the next six months.
The specter of recession was the second-biggest worry, with 71% concerned, and the possibility of inflation was third (65%).
"These results support our view that the U.S. economy has entered into a recession and the economy is likely to remain weak through the middle of next year and beyond if the federal economic stabilization plan is not enacted," said Stuart Hoffman, chief economist for PNC.
Copyright Agence France-Presse, 2008