Business survey: Why Phoenix decision-makers are optimistic about growth – Phoenix Business Journal

Local leaders of small and midsize businesses are increasingly confident in the U.S. economy and their prospects for growth. Despite ongoing concerns about inflation and interest rates, more decision-makers are looking to fund new growth initiatives, ranging from investments in marketing to artificial intelligence (AI)-related projects to boost revenues and strengthen their competitive advantage.

These findings are part of Umpqua Bank’s 2024 Business Barometer, an annual study that delves into the outlook and plans of U.S. small and midsize businesses. It includes a survey of businesses in the Phoenix metropolitan area, which now ranks as the fifth most populous region in the U.S.

According to this year’s study, 61% of local decision-makers rate economic conditions in the U.S. as excellent/good. This optimism is especially strong among larger companies and represents higher levels of overall optimism than a year ago, when 54% gave similar marks on the economy.

Rising confidence boosts growth expectations

Phoenix boasts a diverse economy that includes leisure and hospitality, health care, data centers — an anchor for the nascent generative AI industry — as well as warehouse distribution centers and chip manufacturing. It also continues to attract interest from companies looking to move parts of their operations from higher-cost markets.

Umpqua Bank’s Kevin Gillette says the region’s dynamic economy explains in part the growing optimism among local business.

“We’re definitely seeing positive momentum. Phoenix’s economy continues to thrive and is outperforming other regions, including when it comes to managing inflation,” said Gillette, Umpqua Bank’s commercial banking director in Phoenix. “More businesses are confident in their future and are taking concrete steps to prepare for growth.”

Over the next 12 months, 81% of Phoenix businesses anticipate revenue growth, and 75% expect increased profitability — both up 11 points over last year. A strong majority also say they are likely to expand their business through borrowing (71%), add headcount (62%) and increase their real estate footprint (51%) in the next 12 months.

Investments in AI on the rise

This year, Umpqua’s study explored the impact of generative AI on business plans in greater depth for the first time.

Midsize businesses across the country report either broadly deploying the technology across their organization (42%) or for at least a few tasks or functions (36%). Small and midsize businesses in the Valley of the Sun are not far behind.

Umpqua found that more than half of Phoenix-area businesses surveyed are likely to invest in AI in the next 12 months. Nearly half report that generative AI is already improving their competitiveness. They see the greatest benefits from AI for IT and cybersecurity initiatives (45%), as well as for their marketing and sales efforts (17%). More than 8 in 10 are likely to hire personnel with AI expertise to strengthen their own internal capabilities.

“We have seen both in the survey findings and within focus groups that business leaders have made huge gains in understanding and implementing AI,” said Richard Cabrera, head of commercial banking at Umpqua Bank. “We are having many more discussions about how to finance and implement the technology as AI capabilities continue to evolve quickly, and companies are eager to harness the enormous opportunities they bring.”

Managing supply chains is a top priority

Although the economy has turned the page on pandemic-driven supply chain issues, many businesses are still focused on ensuring their supply chains are functioning well and taking steps early to address potential disruptions. Among Phoenix operators surveyed, nearly 6 in 10 experienced long lead times or transportation delays in the last 12 months that have impacted their businesses, and 68% had to source materials in different ways.

These results shed a light on why more than 6 in 10 area businesses surveyed say they brought more of their supply chains back to the U.S. in the last 12 months. Moreover, these same businesses report that enhancing controls over their supply chains remains a top focus to manage risk.

Not letting their guard down — protecting payment systems

Cybersecurity remains a top priority for enterprises, both nationally and in the Phoenix area, as cyberattacks and fraud activity escalate. Of those surveyed, 86% of Phoenix businesses indicate they’ve implemented fraud prevention solutions offered by their bank, such as positive pay, biometric authentication or account access controls.

As more businesses implement instant payment technology, 86% have or plan to strengthen safeguards against real-time fraud. The vast majority (88%) are likely to invest in financial tools to protect their payment systems in the next 12 months.

According to Kathryn Albright, Umpqua Bank’s head of global payments and deposits, strengthening safeguards to prevent fraud is especially important as business transactions are increasingly completed in real time through instant payment technology.

“Enhancing fraud prevention solutions is paramount for businesses of all sizes as bad actors become more sophisticated and the marketplace embraces the efficiency and convenience of real-time transactions,” said Albright. “Investing in advanced security measures not only protects assets — it also builds trust with customers, positioning businesses as responsible and reliable partners in the digital economy.”

To download Umpqua Bank’s 2024 Business Barometer, visit umpquabank.com/business-barometer.