Change in DC bolsters business-owner sentiment, bank surveys show

Vincent DeWitt/BLOOMBERG NEWS

Business owners are upbeat about their prospects for the coming year, a pair of bank surveys found, presenting the potential for stronger loan demand.

JPMorgan Chase's 2025 Business Leaders Outlook survey, released this week, found confidence in the national economy jumped 12 percentage points from a year earlier to 55% among small-business owners, and more than doubled from 31% to 65% among midsize business leaders.

Three-quarters of respondents said they had a positive outlook for 2024. In total, 2,644 U.S. business owners and leaders across industries were surveyed in November and December after the presidential election.

"Businesses are entering 2025 with positive momentum after navigating a period of elevated inflation," said Ginger Chambless, head of research for JPMorgan commercial banking. "We'll be watching closely to see how this optimism extends throughout the year and influences companies' growth strategies."

Should the favorable overall outlook translate into business expansion, it would likely drive increased loan demand and, by extension, new business for banks. This includes community and regional banks that often focus on lending to small and midsize businesses.

John Asbury, CEO of the $25 billion-asset Atlantic Union Bankshares in Richmond, Virginia, said that, following President-elect Donald Trump's November election win and imminent return to the White House later this month, business owners have high expectations for deregulation and lower taxes. This is largely based on Trump's campaign promises and positions he championed in his first term. Such policies could lower businesses' costs and boost their profitability, he said. It could also galvanize them to borrow and invest in growth.

"I do think it will pick up," Asbury said of loan growth.

A majority of business owners surveyed by JPMorgan said inflation remained a top concern.  

Any meaningful bump would mark a bullish departure from 2024. Median sequential loan growth for banks under $10 billion of assets, for example, was just 1.2% in the third quarter, down from 1.7% the previous quarter and 1.9% a year earlier, according to S&P Global Market Intelligence data. 

In a separate survey of 1,000 business owners that was also released this week, the $24 billion-asset Provident Bank in Iselin, New Jersey, found similar levels of optimism.

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Its 2025 Economic Outlook survey, conducted late in 2024, found business owners planning on increasing capital spending and investing in technology.

The survey found that 63% of respondents believe their own business will be in better shape by the end of 2025, while 68% anticipate they will increase capital spending this year.

Just over 50% expect to increase hiring, with 36% predicting no changes in their staffing plans. Nearly 70% plan to invest in artificial intelligence tools, with 29% ready to implement them.

The results showed a "focus on growth and strategic expansion," said Anthony Labozzetta, president and CEO of Provident.  

Still, Provident found that top challenges include staffing costs and inflation, with each concern garnering a 46% share of responses.  

Inflation reached a 40-year high in June 2022 at 9.1%. This developed amid the fallout of the coronavirus pandemic and the supply-chain problems it created. Russia's invasion of Ukraine disrupted global energy markets in 2022 and sent oil and gas prices surging.  

The Federal Reserve had boosted rates 11 times from March 2022 to mid-2023, driving borrowing costs higher, curbing spending and helping to curtail overall prices. This helped to bring inflation below 3% late in 2024, to 2.7% in November, but it also curbed loan demand and hindered banks' growth last year. What's more, inflation remains above the Fed's 2% target.

That noted, the Fed also cut rates three times in the second half of last year, signaling increased confidence in policymakers' ability to contain cost pressures in 2025.