Small-Business Sales Drop in June as Customers Cut Back Spending

A grocery store in Columbia, Md., on June 8, 2024. (Madalina Vasiliu/The Epoch Times)

Sales at small businesses declined in June from the previous month as high prices forced consumers to scale down spending on goods and services, according to a report by fintech company Fiserv.

The Fiserv Small Business Index, which measures the performance of small businesses in the United States, declined by four points last month, to 140, from May, according to a July 8 statement. While small-business sales and transactions grew on a yearly basis, these metrics slowed down month over month, suggesting the pace of growth is slowing down.

Out of the 34 subsectors in the index, food services and drinking places saw the highest sales volume, followed by specialty trade contractors and professional, scientific, and technical services. All three subsectors saw sales and transactions decline in June.

In the specialty trade contractors subsector, demand for pool servicing and general carpentry cooled down. With regard to professional, scientific, and technical services, growth was found to have slowed down in recent months even though the overall annual growth appeared to be strong.

As to the retail sector, only general merchandise saw positive monthly sales growth. The biggest sales declines were seen in gasoline stations, motor vehicles and parts dealers, building materials, and health and personal care.

“As the quarter came to a close, consumers throttled back both spending and foot traffic across retail, restaurants, and other service-based businesses,” said Prasanna Dhore, chief data officer at Fiserv.

The average amount spent by a customer per store visit was lower in June, which was the result of inflation and budget consciousness among consumers, he said. Meanwhile, there was a series of “short-term seasonal demand shifts” in several sectors. These factors contributed to a slowdown in the index, Mr. Dhore stated.

The decline in the small-business index trends with the burdening high living costs of households.

Between 2020 and 2023, the cost of average grocery items increased by almost a quarter. Specifically, items such as coffee, sugar, bread, sugar, and ham saw prices jump by more than a third. People now have to spend almost a quarter of their monthly incomes to pay for a median-priced single-family home.

These costs have added up, straining customer budgets and forcing people to become more mindful about their spending activities.

National Retail Federation Chief Economist Jack Kleinhenz said that consumer spending trends have become difficult to read. However, he claimed to be overall optimistic about the situation.

“Spending has been uneven, but remains in good condition, notwithstanding the slower pace of payrolls, subdued consumer confidence, and price deflation for retail goods,” he said.

“Looking ahead, we expect consumer spending trends to continue even though they will likely be tempered by softening of employment and income growth.”

Small-Business Conditions

Small businesses continue to be weighed down by rising prices, according to a recent report by the National Federation of Independent Business (NFIB).

In June, 21 percent of small-business owners reported inflation as the top issue facing their operations, the association said.

“Increasing compensation costs has led to higher prices all around. Meanwhile, no relief from inflation is in sight for small-business owners as they prepare for the uncertain months ahead,” NFIB Chief Economist Bill Dunkelberg said.

The 12-month inflation rate in June came in at 3 percent, a level that has not been broken since June 2023.

While the NFIB Small Business Optimism Index hit its highest reading for the year in June, it remained below the historical average for the 13th straight month, suggesting ongoing negativity among owners.

But even though small businesses are facing certain challenges as of now, they are “increasingly optimistic about the future,” according to the U.S. Chamber of Commerce’s Small Business Index report for the second quarter of 2024.

“Plans to increase staff and investment are both up this quarter, and revenue expectations for next year reached the highest levels recorded in this survey,” the report said.

More than seven out of 10 respondents expect revenue increases in 2025, a viewpoint that was consistent across business size and sectors.

Younger businesses—those in operation for less than 10 years—were found to be more optimistic about future hiring and higher investments than businesses that have been in operation for 11-plus years.

Small businesses are a crucial part of the U.S. economy. The chamber estimates that there are more than 33 million small businesses in the country, which collectively account for 99.9 percent of all U.S. businesses.

Between 1995 and 2021, these businesses were responsible for nearly two-thirds of new jobs created in the United States, the chamber noted.