Some 93% of small business owners are worried that the United States will enter a recession in the next six months, a survey released by Goldman Sachs showed on Wednesday, with a majority of firms saying the country was headed in the wrong direction.
In the same survey a year ago, with increased vaccinations promising an end to the COVID-19 pandemic, businesses were more optimistic and 67% said the United States was headed in the right direction. That has reversed in the latest version, 61% of responding firms said the United States was on the wrong track.
Some 78% of small business owners said the economy has got worse in the past three months, with only 5% saying it had improved. Over the same period, 84% said hiring challenges had worsened and 80% said inflationary pressures had increased.
This quarterly survey is the first time the recession question has appeared. It found that 6% of respondents were not worried at all about a recession, while 1% said they did not know.
Supply chain issues got worse for 38% of respondents in the past three months, while 40% said such problems had stayed the same.
Among the “most worrisome data points” in the survey was that 38% of small businesses said they were seeing a decline in customer demand as a result of price increases on goods and services, said Joe Wall, who heads advocacy efforts for Goldman’s 10,000 Small Businesses training program.
The results will help to inform discussions at a summit of the program in Washington next week, where more than 2,500 small business owners are expected to meet with more than 400 government officials.
FOCUS ON COSTS
Jill Bommarito, founder and owner of Ethel’s Baking Co near Detroit, has been scrambling to keep up with rising costs at her 30-employee business making gluten-free dessert bars sold in Whole Foods and other grocery chains.
Butter prices have more than doubled, her wage bill has increased by 30%, packaging and shipping costs have jumped and she now has to carry double the ingredient inventories to avoid production disruptions, which “eats cash,” she told Reuters.
“We’ve got COVID, labor, inflation, supply chain issues, but the biggest thing right now is that it feels like we’re heading into recession,” said Bommarito, who started Ethel’s in 2011 and is a member of the Goldman program.
“I haven’t had a conversation with another small business owner in the last two weeks that this hasn’t been the biggest topic — like how are we going to weather this?” she said.
Her plan is to “micro-manage” costs, hold daily risk assessments, carefully select customer relationships to avoid over-expansion and diversify the product line into cookies.
Despite the gloomier outlook about macroeconomic challenges, 65% business owners in the said they remained optimistic about prospects for their own businesses and 65% said they were currently hiring full- or part-time employees.
The survey is based on responses from 1,533 Goldman Sachs 10,000 Small Businesses participants conducted by Babson College and David Binder Research from June 20-23.
Among changes the firms are seeking is the reauthorization and modernization of the Small Business Administration – the federal agency that supports companies with loan guarantees and technical advice – a step that not taken place in 20 years.
Bommarito said changes were needed to smooth the process for banks to approve SBA loans to make small business lending “more attractive” to banks.
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