Small and mid-size business owners across the country are entering the final quarter of the year with a mix of record-breaking optimism and a very real awareness of the economic obstacles ahead. According to PNC’s latest Economic Outlook Survey, both the confidence levels of business leaders and their anxieties over inflation, supplier pricing, and tariffs continue to rise — creating a nuanced picture of resilience in an uncertain environment.
Despite this tension, the headline is clear: confidence remains strong.
Even with fewer businesses expecting demand or profits to rise over the next six months, owners believe they have the tools, experience, and adaptability to navigate whatever comes their way.
Below, we examine why optimism remains high, what challenges business owners are most concerned about, and how shifting trends in pricing, hiring, and trade are shaping decisions going into 2026.
Record Optimism, Even as Expectations for Demand and Profits Decline
PNC’s survey shows that optimism around the U.S. economy and individual business prospects has surged to its highest level on record:
- 58% of respondents feel optimistic about the future of the U.S. economy — up from 56% a year ago.
- 84% feel optimistic about their business outlook, a significant jump from 76% last year.
This upward trend in sentiment stands in contrast to expectations around the next six months:
- Only 58% expect increased demand (down from 64% last year).
- Just 48% expect profits to rise (down from 57% a year ago).
This combination — rising optimism paired with falling short-term expectations — highlights a phenomenon unique to the current business environment:
owners trust in their own resilience more than they trust in the external economic landscape.
How Can Business Owners Feel Optimistic While Facing Economic Pressure?
It may seem contradictory to express optimism while simultaneously predicting lower demand, higher prices, and smaller profits. But PNC’s chief economist Gus Faucher notes that today’s concerns are “still statistically lower than in other survey cycles.” More importantly, business owners have spent the last several years facing the most turbulent economic conditions in modern history — and many emerged stronger.
Business owners’ confidence is grounded in:
1. Post-pandemic proof of resilience
Owners have already navigated:
- shutdowns,
- labor shortages,
- supply chain breakdowns,
- inventory shocks,
- and unpredictable demand swings.
Having survived — and in many cases adapted creatively — owners feel more capable of tackling the challenges ahead.
2. Trust in long-term customer demand
Small businesses often rely on repeat customers, community presence, and long-standing relationships — all of which act as stability anchors even when profits temporarily tighten.
3. Greater willingness to pivot and adapt
Owners are more proactive about adjusting:
- inventory strategies,
- staffing models,
- pricing structures,
- service offerings,
- and operational expenses.
The mindset has become: “We’ve faced worse. We can handle this too.”
The Top Concern: Pricing and the Rising Cost Environment
Although optimism is high, the most pressing challenge reported by business owners is uncertainty around prices — both what they pay and what they charge.
Inflation & Tariffs Lead the List of Worries
Respondents report being “extremely concerned” about:
- Inflation: 46%
- Higher tariffs: 38%
- Supplier prices: 36%
These concerns reflect a ripple effect across the entire supply chain. Tariffs add pressure upstream, suppliers raise prices accordingly, and businesses must then decide whether or not (and how much) to increase prices for their customers.
Supplier Price Increases Are Expected to Continue
More than half of respondents — 51% — expect prices from suppliers to increase in the coming months. That figure is:
- Up from 45% last spring
- Down from 59% one year ago
This mild downward trend from last year suggests that while cost pressures remain, they are stabilizing compared to the peak strain of 2024.
Businesses Are Increasing Prices — But With More Caution
- 58% of business owners expect to raise prices (up from 53% in spring 2025).
- This is still lower than the 61% who planned increases last year.
Among those planning price hikes:
- 54% cite non-labor costs as the reason — a steep rise from 37% in 2024.
- Only 30% blame labor costs (down from last year).
- Just 15% raise prices due to favorable market conditions.
The data suggests that businesses aren’t raising prices because they want to — they’re raising prices because they have to.
Tariffs Are a Direct Driver of Higher Prices
Tariffs are specifically shaping pricing decisions:
- 48% say tariffs are increasing supplier prices.
- 46% say tariffs directly contributed to their decision to raise customer prices.
Owners appear to be walking a tightrope: balancing unavoidable cost increases with the risk of losing customers by raising prices too steeply.
Hiring Slows as Labor Challenges Persist
Hiring momentum has cooled significantly.
- Only 13% of business owners plan to hire in the next six months — down from 18% last year.
- Nearly 40% of those who plan to hire say recruitment is more difficult than it was six months ago.
Top hiring challenges include:
- Lack of skills/experience: 30%
- Lack of applicants: 29%
- Candidates unable to meet legal or security requirements: 16%
This slowdown suggests employers are becoming more conservative with expansion plans, especially amid rising costs and lower expected profit growth.
Economic Outlook: What Business Owners Expect Moving Into 2026
The fall survey uncovers several revealing trends:
- 44% believe a recession is likely in the next 12 months
- but only 16% think it is “extremely likely.”
- Inventory impact of tariffs is mixed:
- 17% say tariffs increased inventory
- 17% say tariffs decreased inventory
- 52% saw no impact at all
- Cash reserves are expected to shrink:
- 23% expect lower cash reserves next year
- Only 22% expect higher reserves — the first time in survey history the “declining” percentage has surpassed “increasing.”
- AI adoption is accelerating:
- 24% of business leaders say AI will have the largest impact on their business in the next two years.
What This Means for Small Business Owners
The survey paints a picture of a business community that is:
- Optimistic but realistic
- Confident but cautious
- Forward-looking but financially pressured
Owners expect challenges — but they also expect to overcome them.
To stay resilient, businesses may benefit from:
- Sharper forecasting and cash visibility
- More flexible staffing and operational strategies
- Careful, data-backed pricing decisions
- Stronger supplier negotiations
- Technology adoption that reduces manual work
- Payment systems that increase cash flow, speed deposits, and streamline operations
This is where merchant services, automation, and financial planning tools intersect.
The more efficiently money flows into the business — through online payments, invoicing, subscriptions, point-of-sale systems, and ACH — the stronger the business’s defense against inflation and volatility.
The Bottom Line
Small business owners remain highly confident, even as expectations for profits and demand soften. While pricing pressures, tariffs, and inflation continue to influence day-to-day operations, owners’ recent experiences overcoming extreme economic hurdles have strengthened their sense of resilience.
Trade challenges, rising supplier costs, and a cooling labor market present obstacles — but business owners are strategically adjusting their prices, adopting new technologies, and preparing for possible shifts in demand.
As the economy moves toward 2026, one theme stands out clearly:
small businesses remain optimistic not because conditions are easy, but because they are more capable, adaptable, and prepared than ever before.