Small Business Inflation Worries Highest Since 1979

Investing News

The number of small business owners reporting inflation as their top business problem has reached its highest level since 1979, according to a survey by the National Federation of Independent Business (NFIB).

Thirty-seven percent of small business owners reported that inflation was their single most important problem in operating their business, an increase of three points from June and the highest level since the fourth quarter of 1979.

Overall, the NFIB’s Small Business Optimism Index rose to 89.9, marking the sixth consecutive month below the 48-year average of 98. The reading was higher than estimates for a reading of 89 and slightly more than June’s reading of 89.5. Owners expecting better business conditions over the next six months increased nine points from June’s record low level to a net negative 52%. Expectations for better business conditions had deteriorated every month from January to June of this year.

Thirty-two percent of owners reported that supply chain disruptions have had a significant impact on their business. Another 36% report a moderate impact and 23% report a mild impact. Only 9% reported no impact from recent supply chain disruptions.

Thirty-seven percent of owners said they plan to increase prices, while 29% expect their sales to be higher, down one point from June. Among owners reporting lower profits, 40% blamed the rise in the cost of materials, 17% blamed weaker sales, 10% cited labor costs, and 2% cited higher taxes and regulatory costs.

“There are over 20 million small businesses in the U.S., employing more than 60 million workers, or roughly half of the country’s workforce, and accounting for more than 40% of economic activity. If small business optimism continues to wane, they will be among the first to pull back on their spending and their headcount,” said Caleb Silver, Editor-in-Chief of Investopedia.

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