Three-Quarters of Small Businesses Hurt by High Inflation: Survey

Men are seen on the sidewalk outside businesses in New York City on Dec. 6, 2021. Mary Altaffer/AP Photo

A new survey by Goldman Sachs paints a picture of U.S. small businesses struggling under the weight of surging prices, hiring woes, supply chain dislocations, and an Omicron-driven fourth wave of infections.

The survey, released on Jan. 24 and based on a poll of 1,466 small businesses, shows that 76 percent of respondents said inflation has had a negative impact on their business’ financial health over the past six months.

While the survey didn’t differentiate consumer price inflation from producer price inflation, both measures have in recent months hit multi-decade highs.

The Consumer Price Index (CPI), a measure of inflation from the perspective of end consumers of goods and services, jumped by 7 percent in the 12 months through December, the fastest pace since 1982. The Producer Price Index (PPI), which reflects input costs borne by businesses and is widely seen as a leading indicator of future consumer price inflation, surged by 9.7 percent in the year through December, a slight slowdown from November’s blistering pace of 9.8 percent, the fastest on record, which dates back to 2010.

While government data shows that the month-over-month pace of both producer and consumer price inflation slowed in December, the Goldman poll showed 84 percent of small business owners saying upwards price pressures have increased since September 2021, suggesting inflation may have become more entrenched in some sectors of the U.S. economy.

While inflation was a serious concern to small business owners, it ranked third (18 percent) as the most significant problem facing small businesses. Workforce challenges were the chief worry, with 50 percent identifying difficulties finding and retaining qualified staff as their biggest business problem, followed by 19 percent pointing to supply chain woes.

The Omicron surge has also had a negative impact, with 71 percent of small business owners telling Goldman that the recent rise in cases has hurt their bottom line, while 37 percent said they have been forced to close or scale back operations on account of the fourth wave.

The findings dovetail with a recent COVID-19 impact survey from the National Federation of Independent Business (NFIB). Based on a sample of 710 responses from small business owners, the survey showed that the recent increase in COVID-19 cases has negatively impacted around two-thirds of small businesses.

“The COVID-19 pandemic, exacerbated by the recent surge in COVID cases, continues to disrupt small business operations and sales,” Holly Wade, Executive Director of NFIB’s Research Center, said in a statement. “Staffing shortages and supply chain disruptions also haven’t eased for small businesses despite owners attempts to raise compensation and adjust business operations to accommodate.”

The NFIB survey showed a total of 70 percent of small business owners said the Omicron wave has hurt sales to some degree, with 10 percent reporting that revenues have been hit “significantly.”

A separate NFIB report indicates that inflation fears among small business owners have risen to their highest level in four decades, with owners remaining broadly pessimistic about future economic conditions.

The NFIB’s small business economic survey (pdf), released in early January, shows that 22 percent of small business owners reported that inflation was their single most important business problem, the highest reading since 1981.

“Inflation is at the highest level since the 1980s and is having an overwhelming impact on owners’ ability to manage their businesses,” NFIB Chief Economist Bill Dunkelberg said in a statement.

The percentage of owners raising average selling prices edged down two points to a net 57 percent in December, an improvement from November but a historically elevated reading, according to NFIB.