HomeBusinessInvestingSmall Businesses Are Struggling Under the Weight of Inflation--And They're Not Optimistic

Small Businesses Are Struggling Under the Weight of Inflation–And They’re Not Optimistic

Small businesses are far from out of the woods.

“Their expectations for sales growth and business conditions later this year are in the tank,” according to the latest reading of the Small Business Optimism Index from the National Federation of Independent Business, a U.S.-based association of small businesses. 

In March, the NFIB shows business optimism fell to its lowest level since April 2020. Their biggest concern? Inflation. Thirty-one percent of those surveyed said inflation was a top concern–marking the highest tally since the first quarter of 1981, as everything from milk to mortar has become more expensive.

In March, inflation hit a 40-year high, which will likely lead to action from the Federal Reserve. Should the Fed opt for a rate hike in May, it can potentially curb price hikes–but it may also slow demand and cause a recession.

Compounding the issue are continued supply chain difficulties (which 40 percent of business owners say have a “significant” effect on their business) and increased labor costs. Seasonally adjusted, 49 percent of business owners say they’ve raised compensation, and 28 percent plan to do so in the next three months.

As a result, the higher costs have prompted nearly three-fourths of business owners to raise prices. Still others are getting crafty about keeping prices in check. They’re bulk-buying supplies, using alternative ingredients where product is concerned, and making the workforce they already have more efficient. The need for this kind of hustle isn’t likely to stop soon. Inflation is expected to remain elevated even after what some economists project is its peak.

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