Alabama’s economy is expected to continue strengthening as more small and mid-sized businesses plan to hire workers and boost wages through the close of 2015 and into 2016.

The findings, compiled in Pittsburgh-based PNC Financial Services Group Inc.’s Fall 2015 Economic Outlook survey for Alabama, indicate slightly less overall optimism than was reported six months ago but are bolstered by stronger long-term hiring plans.

“Our Fall 2015 survey shows small and mid-sized business owners in Alabama are cautiously optimistic about the next six months,” PNC Assistant Vice President Mekael Teshome, an economist for the Southeastern region and author of the report, said.

Teshome said manufacturing statewide will be buoyed by the national economy’s continued moderate expansion, and the major drop in energy prices during the past year provides a “meaningful boost to the state’s businesses and consumers.”

“It is also encouraging that inflation pressure is minimal. A similar number of owners expect their prices to increase while more plan to boost employees’ salaries,” he said.

The most recent Alabama survey, conducted by phone between July 21 and Aug. 20, consisted of 520 interviews with small and mid-sized business owners nationwide, including 151 in Alabama.

Growing concern on the national front

Although 77 percent of Alabama survey respondents said they are optimistic about their companies’ prospects during the next six months – compared with 81 percent in the spring – pessimism about the national economy increased substantially since the spring and is almost half of the national average. Almost half of of Alabama respondents – 47 percent – said they are optimistic about the national economy compared with 64 percent six months ago, while 88 percent of respondents nationwide expressed optimism.

Other key findings from the report are:

• The number of Alabama business owners intending to hire full-time employees during the next six months nearly tripled from 7 percent of respondents in spring to 20 percent in the fall.
• The number Alabama business owners expecting to cut payrolls during the next six months, meanwhile, increased to 9 percent compared with only 5 percent in the spring.
• Forty-five percent of survey respondents expect sales to increase, down slightly from the 51 percent who anticipated sales growth in the spring.
• Nationally, 26 percent plan to hire more employees – the most since 2012 – and 52 percent expect sales to increase.
• More than one in three Alabama business owners, or about 36 percent, expect to increase employees’ pay during the next six months, well above the 21 percent reported in the spring.
• Fifty-nine percent plan to give raises of 3 percent or more during the next six months.
• Thirty-seven percent say it has become harder to hire qualified employees than six months ago.
• Fifteen percent of those who are not hiring say it is because they cannot find the right skilled workers.
• Pricing pressure remains steady, however, with 30 percent planning to charge higher prices during the next six months, compared with 27 percent one year ago.
• For prices charged by suppliers, 59 percent expect price hikes compared to 45 percent in the spring.
• Eighty-one percent expect consumer prices to rise in the coming year compared with 90 percent one year ago, reflecting in part the sharp drop in energy prices.
• Housing prices remain steady with 34 percent expecting prices to rise in their local market during the next six to 12 months, compared with 50 percent in the spring and 43 percent one year ago.
• Sixty-two percent of Alabama business owners expect to make a net profit this year. While the average profit is about 8 percent of sales, 26 percent surveyed expect to make more than 10 percent over operating expenses.
• Eighty-four percent say they will not pursue new loans or lines of credit in the next six months while 16 percent will. When asked about access to credit now vs. three months ago, 15 percent say it is easier and 17 percent say it is harder to obtain.
• Forty-two percent of survey respondents say they have spent from a loan or line of credit in the past two years, with the most commonly reported use being the purchase of equipment or supplies.