For months, small businesses owners cited the lack of available workers as the biggest problem they faced.
There’s a new biggest problem – inflation.
That’s according to the National Federation of Independent Businesses Optimism Index for March 2022. The NFIB Chief Economist Bill Dunkelberg said that during March, 31% of small business owners said inflation was their biggest problem. That’s an increase of 5% from February.
Small Business Owner Pessimism Increases
The optimism rating for small business owners decreased from February to March by 2.4 points to 93.2. That’s far below the 48-year NFIB average optimism rating of 98.
Owners expecting better business conditions over the next six months decreased 14 points to a net negative 49%, the lowest level recorded in the 48-year-old survey. Forty-seven percent of owners reported job openings that could not be filled, a decrease of one point from February.
The net percent of owners raising average selling prices increased four points to a net 72% (seasonally adjusted), the highest reading in the survey’s history.
Inflation Impact Key Takeaways
Staffing shortages and supply chain disruptions have been contributing to small business owners’ worries.
- 47% of business owners say job openings can’t be filled. The majority of those openings are in transportation, manufacturing, and construction. Business owners in those fields are optimistic that the jobs can be filled seasonally.
- 72% of business owners say they’ll have to raise prices. The majority of those business owners are in wholesale, construction or agriculture businesses, or retail sales.
- 40% of business owners cite supply chain disruptions as a problem.
- 23% was the average annual percentage for unfilled job openings during the NFIB’s 48-year history of studying small business economic trends.
How Are Businesses Handling Inflation?
Inflation hasn’t been entirely sudden. In 2021, the costs of products and services increased at a rate of 3-4%. And during 2022, small businesses owners report that their overall operating costs have increased by an average of 20%. Their profit margins are greatly decreased.
What are they doing?
Implementing cost-cutting measures – They are doing their best to decrease the costs of utilities, and sometimes reducing hours. According to the Biz2Credit Lending Index for March, they are also borrowing to purchase needed supplies when those supplies are available “to hedge against shortages.”
Raising Prices – As profit margins squeeze tighter, there’s no other solution. Small business owners are striving to keep customers happy as they’re forced to increase the costs of goods and services.
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