Small-Business Optimism Inches Up, but Inflation Remains ‘Serious Problem’: NFIB

Customers shop at the TJ Maxx store in the Mall at Prince George's in Hyattsville, Md., on Aug. 17, 2022. Chip Somodevilla/Getty Images

Small-business sentiment saw an improvement in August, but continued to remain depressed, according to a survey by the National Federation of Independent Business (NFIB).

The NFIB Small Business Optimism Index rose by 1.9 points last month, to 91.8, data from a Sept. 13 press release showed. Though the index reversed some of the declines seen during the first half of the year, it remained below the 48-year average of 98 for the eighth consecutive month. Among survey respondents, 29 percent said that inflation was their single most important problem when it came to running their business.

“The small-business economy is still recovering from the pandemic, while inflation continues to be a serious problem for owners across the nation,” said NFIB Chief Economist Bill Dunkelberg.

“Owners are managing the rising costs of utilities, fuel, labor, supplies, materials, rent, and inventory to protect their earnings. The worker shortage is impacting small-business productivity as owners raise compensation to attract better workers,” he said.

The second-biggest problem faced by small-business owners is labor quality, at 26 percent. Ten percent of owners pointed to labor costs as their number-one business problem.

The frequency of reports showing positive profit trends declined seven points from July, to a net negative 33 percent. Among businesses seeing lower profits, 36 percent blamed it on rising material costs, 23 percent on weaker sales, and 12 percent on labor costs.

Though the net percent of owners raising average selling prices declined by three percentage points, it still remained high, at a net 53 percent. The proportion of respondents expecting business conditions to improve over the next six months stood at a net negative 42 percent.

Inflation Worries

The recently published Small Business Survey by Verizon also showed that inflation is one of the top areas of concern for small and midsize businesses. Among respondents, 35 percent admitted that they were worried about the impact of inflation on their sales.

“Inflation can have a devastating effect on the entire economy, but small-business owners can be particularly vulnerable,” Baruch Silvermann, financial expert and CEO of The Smart Investor, told The Epoch Times.

Large corporations may be able to weather a period of high inflation. But for small businesses, margins are much less, he pointed out. Moreover, small businesses also have to be extremely cautious before passing on rising material costs to customers since increasing product price could render them less competitive.

According to data from the U.S. Bureau of Labor Statistics, the Producer Price Index (PPI) for final demand rose by 9.8 percent in the 12 months between July 2021 and July 2022. The PPI is a measure of wholesale level inflation.

Autumn Spredemann contributed to the report.