With rate cut, Madison County business owners cautiously optimistic about their prospects

Sep. 27—ANDERSON — Even before the Federal Reserve surprised some financial experts by cutting its prime interest rate a half point last week, Andrea Dodson was bullish about the outlook for her business.

"I'm really optimistic about things that are coming," said Dodson, who co-owns Redwood Automotive in Anderson with her husband, Jake. "(Interest) rates are dropping a little bit, which always feels good, and I feel like we're stable."

Dodson's perspective isn't uncommon among small business owners across the country, many of whom expressed optimism about the overall state of the nation's economy in a recent survey conducted by PNC Bank.

The institution's semi-annual survey of owners of small and mid-sized businesses found that 56% rated themselves highly optimistic about the national economy — a significant jump from 34% at the same time last year. An even greater portion — 76% — are highly optimistic about the prospects for their own businesses.

Both those numbers, the bank's economists said, are among the highest figures in the survey's 23-year history.

"This is a far cry from a stalled economy," said Stu Hoffman, senior economic advisor for PNC.

The higher rates of optimism among business owners, he noted, bolster the institution's forecast of a soft landing for the U.S. economy — a primary goal of the Fed's efforts to reduce inflation by keeping interest rates higher over the past three years.

"We're optimistic about an economic soft landing, where you'll see a little slower growth, lower inflation, soon to be lower interest rates, continued job growth," Hoffman said.

Locally, business and economic development leaders voiced more cautious expectations for the months ahead. Some of them noted they haven't yet seen certain indicators of robust activity that would inspire full confidence the economy is on sound footing.

"Our bigger companies that are actually thinking about expansions have held off on that for a while and have yet to pull the trigger," said Rob Sparks, executive director of the Corporation for Economic Development in Madison County.

"I see our project pipeline slowing and timelines being pushed back. I'm sensing a great deal of caution about where the economy is going to go. The settling of the economy is still going on."

A key unknown for many small business owners is who will occupy the White House beginning in early 2025. The survey found that more than two-thirds of owners are at least moderately concerned about the risk the country's political uncertainty poses to their business. Though that number is high, Hoffman said he expected those concerns to rise in sync with the run-up to the presidential election.

"We know we're hearing more about different economic policies, tax policies, immigration," Hoffman said. "It doesn't really surprise me to see that two-thirds are saying, 'I don't know what's going to happen.'"

Others see reasons for optimism in other survey data. About 29% of those surveyed anticipate requesting financing for capital improvements, in the form of either new loans or lines of credit. Traditionally, increased capital spending indicates business owners are investing more heavily in their core operations, a sign of overall health for the economy.

"Businesses aren't looking to add on debt if they're not sure that they're going to be able to repay it," said Clayton Whitson, president and CEO of the Madison County Chamber of Commerce.

If that trend holds true locally, according to Jennifer Hall, executive director at Bankable, the area's economy is poised for a significant rebound. She said "unprecedented demand" for loans offered by the nonprofit lending arm of the Flagship Enterprise Center in Anderson indicate that businesses are gaining confidence in their financial outlooks.

"We're seeing more working capital types of requests," Hall said. "We were just talking about several loans where people need some working capital. Maybe they've gotten a big contract and they need a little extra cash to meet payroll.

"We're definitely preparing for more demand, certain with where interest rates are," she added. "We're seeing people needing capital now more than ever."

Hall said the Flagship's small business incubator space is 87% occupied, the highest percentage in its nearly two-decade history. She noted that more people are choosing to go into business for themselves, which could diversify the local economy and create even more opportunities.

"With the job market slowing down a little bit, it makes entrepreneurship a much more attractive option," Hall said. "We're seeing some of the seeds of the community development work that's been going on begin to grow, and I think it's going to continue to grow."

Follow Andy Knight on Twitter @Andrew_J_Knight, or call 765-640-4809.

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