Report: Most anticipate boost in revenue as inflation and labor shortages surge
Staff Reports | Digital Free Press
As the U.S. economy faces decades-high inflation, soaring interest rates and continued supply chain and labor shortages, midsize business leaders across the country are increasingly cautious in their economic outlooks, according to JPMorgan Chase’s 2022 Business Leaders Outlook Pulse survey.
The survey was released Monday, June 27 and included more than 1,500 midsize business who participated in the survey between May and June of this year, according to a press release.
About 1 in 5 business leaders (19%) say they’re optimistic about the national economy for the year ahead, the lowest percentage recorded in 12 years of survey data, and down from 75% one year ago, JPMorgan Chase officials report of the survey results.
Pessimism around the national economy jumped to 51% from 10% a year ago. When it comes to the global economy, business leaders have an even more muted outlook, with only 9% expressing optimism, survey results show.
— Ginger Chambless, head of research at JPMorgan Chase Commercial Banking
“The first half of 2022 has really tested business leaders with pricing pressures and increased interest rates, on top of the supply chain- and labor-related issues they were already facing. While it’s surprising to see how drastically sentiment has shifted, it is important to note that business leaders are still mostly upbeat when it comes to their companies and areas that they can more directly control.”
More than 7 in 10 (71%) are optimistic about their company’s performance and 55% feel upbeat about their industry’s performance, though down from 88% and 82%, respectively, one year ago, JPMorgan Chase officials report.
Nearly three-quarters of survey respondents (73%) anticipate increased revenue/sales for the year ahead. However, the outlook for profit growth has been hurt by higher costs, with only 57% expecting increased profits compared to 71% at this time last year.
JPMorgan Chase’s Business Leaders Outlook Pulse survey was conducted online from May 25 to June 10, for middle market companies with annual revenues between $20 million and $500 million. In total, 1,536 business leaders in various industries across the U.S. participated in the survey.
For year-over-year trends, current data is compared with data collected in the second quarter of 2021 and for six-month trends, current data is compared with data collected in the fourth quarter of 2021. The results of this online survey are within statistical parameters for validity, and the error rate is plus or minus 2.5%, at a 95% confidence level.
In the latest survey, 100% of respondents said they’re facing business challenges. Business leaders cite the higher cost of doing business, including inflation, as their top challenge (71%), followed closely by labor issues (70%), including recruiting, hiring and retaining employees and labor shortages.
Notably, business leaders described several factors that contribute to these challenges as more significantly impacting their companies compared to six months ago. Inflation is worse than six months ago, according to 86% of respondents, along with rising interest rates (65%).
Passing increased costs onto consumers
Rising costs are nearly impossible for business leaders to escape — as reported through the survey, 99% report that costs of doing business have increased. More than seven in 10 business leaders point to increased costs from retaining employees (77%), supply chain issues (74%) and hiring employees (71%), as the main drivers behind these increases.
With their bottom lines impacted, more businesses are in turn passing along at least some of the rising costs to consumers. More than three-quarters of businesses (76%) are raising prices, and 42% have passed along at least half of their increased costs to consumers and buyers in the form of higher prices.
Growth plans remain in motion
Despite continued challenges, business leaders nonetheless have their sights set on growth, with 83% expecting to grow their business over the next year. While down from the 90% expecting growth at the end of 2021, more businesses are planning on expanding into new global or domestic markets (63%), and bolstering product innovation (53%), including expanded or new product and service lines, compared to six months ago.
“As has so often been the case in the past two years, business leaders are reacting to today’s challenges by shifting their strategies and taking calculated risks to continue expanding and innovating their businesses,” said John Simmons, head of middle market banking and specialized industries, JPMorgan Chase Commercial Banking. “They’re setting their expectations high and embracing new opportunities to grow even as they navigate this new set of challenges.”
