Small-Business Owners’ Outlook on Economy Deteriorates, Inflation Cited as Top Problem

Georgia Wertz-Woolery (L), owner of Wertz Variety Store, folds fabric with employee Anna Pratt at the store in West Milton, Ohio, on Dec. 7, 2021. Michael Sakal/The Epoch Times

American small-business owners are pessimistic about future economic conditions as inflation weighs down on their operations, according to the latest survey by the National Federation of Independent Business (NFIB).

The proportion of owners expecting business conditions to improve over the next six months fell two points, to a net negative 44 percent, an Oct. 11 NFIB press release states. Though the Small Business Optimism Index rose by 0.3 points, to 92.1, in September, it remained below the 48-year average for the ninth consecutive month. The net percent of owners who are expecting real sales to be higher rose nine points from August, to a net negative 10 percent.

“Inflation and worker shortages continue to be the hardest challenges facing small-business owners,” said NFIB Chief Economist Bill Dunkelberg. “Even with these challenges, owners are still seeking opportunities to grow their business in the current period.”

Among respondents who reported lower profits, 42 percent attributed the situation to the rising cost of input materials, 21 percent cited weaker sales, 12 percent blamed labor costs, 8 percent felt it was lower prices, 6 percent cited usual seasonal change, and 3 percent believed high taxes and regulatory costs to be the culprit.

Price hikes were seen the most in the retail sector, followed by construction, transportation, and wholesale. A net 31 percent of business owners plan on raising prices.

The 12-month Producer Price Index (PPI), a measure of wholesale inflation, rose by 8.7 percent in August, according to data from the U.S. Bureau of Labor Statistics (BLS). Since August 2021, the PPI has remained at or above 8.7 percent every single month.

Inflation Eating Into Profits

The quarterly MetLife and U.S. Chamber of Commerce Small Business Index report released last month found that 90 percent of small businesses were concerned about how inflation would affect their business.

Half of the respondents cited inflation as the biggest challenge, with 71 percent believing the worst is yet to come.

“Inflation is really hitting small business hard, and that reality is negatively impacting their confidence, their ability to hire, invest in their businesses, and grow,” said Tom Sullivan, vice president of small business policy at the U.S. Chamber of Commerce, according to a Sept. 21 post by the Chamber of Commerce.

A report by Kabbage, a lender owned by American Express, has found that overall profits in the small-business sector declined between July 2021 and July 2022. While revenues of small businesses rose by 87 percent during this period, overall profits actually declined by 4 percent.

Since the beginning of this year, small businesses have been battling a tight labor market, high borrowing rates, and rising inflation.

The report notes that 75 percent of respondents admitted to being affected by inflationary pressures, with 56 percent expecting such pressures to last at least until summer 2023.