A majority of small and mid-sized business owners remain optimistic about their financial prospects, according to a new survey by PNC, though inflation and hiring challenges continue to weigh on the economic outlook.

The semi-annual survey, which concluded Feb. 4, found that 78% of business owners are optimistic about their own company’s future—near the survey’s 23-year high of 79% recorded last year. Optimism about the broader economy is somewhat lower, with 50% of respondents expressing confidence in national economic conditions, down slightly from 56% last fall. Similarly, 56% are optimistic about their local economy, a decline from 62% six months ago.

“The latest survey results indicate that the U.S. economy remains in solid shape, with strong demand and a healthy labor market,” said Gus Faucher, Chief Economist of the PNC Financial Services Group.

Businesses with higher revenue are more likely to anticipate growth in sales and profits over the next six months. Overall, 65% of business owners expect sales to increase in the near future, up from 55% last spring. Meanwhile, 57% foresee an increase in profits, a figure that has remained steady since last fall.

While businesses express optimism, concerns about inflation persist. The survey found that 43% of respondents are extremely concerned about inflation, more than double the level recorded in the spring of 2024. However, fewer businesses are planning price hikes, with 53% expecting to raise prices in the next six months, down from 61% last fall.

Hiring remains a subdued priority for many businesses. Only 15% of respondents plan to expand their full-time workforce in the next six months, a decrease from 21% a year ago. Meanwhile, inventory expectations have reached a survey high, with 42% of business leaders anticipating an increase in stock levels.

Looking ahead, business owners are navigating a complex economic landscape, balancing optimism with caution as they assess demand, labor conditions, and inflationary pressures. Despite these challenges, the survey indicates that many remain confident in their ability to weather economic fluctuations in the months to come.