Inflation Concerns Biggest Since 1981 For Small Businesses

In the past month, small business owners’ inflation concerns rose from 22% to 26%. And according to the latest Small Business Optimism Index from the National Federation of Independent Business (NFIB), this is the highest level since the third quarter of 1981.

READ MORE: Inflation ‘Tipping Point’ Reached by Small Business Owners

Inflation is highest since 1981

More than a quarter (26%) of entrepreneurs say that inflation was their main problem running their business. This is a four point increase since December and the highest level since the third quarter of 1981.

The latest report also shows that small business optimism fell to its lowest level in a year in February. In February, corporate optimism fell 1.4 points to 95.7, the second consecutive month below the 48-year average of 98. In January it reached 97.1 points, down 1.8 points from December .

The downward trend is being led by concerns about the rise in inflation that have forced more owners to raise selling prices again in February.

Some Findings from February’s NFIB Optimism Index

The February Index shows that only one of the 10 components of the Index improved, six fell and three remained unchanged.

Due to inflation, an estimated 68% of owners say they will raise their prices – a seven-point increase since 1981, making it a 48-year high. Price increases were seen across the board in retail (79%), wholesale (77%), construction (73%) and manufacturing (72). Seasonally adjusted, net 46% of owners plan price increases.

Entrepreneurs expecting better business conditions to improve in the next six months have fallen two points to a net negative 35%.

Forty-eight percent of owners expect that vacancies cannot be filled by one percentage point from January. The number of unfilled vacancies remains well above the 48-year historical average of 23 percent.

Business inventory plans also fell by one percentage point, after falling five points in January. This follows a promising inventory build-up in the fourth quarter of 2021.

Of the business owners who spent, 41% said they spent on new equipment, 21% on vehicle purchases and 14% on upgraded or expanded facilities. Seven percent bought new buildings or land for expansion and 11% spent money on new furnishings and furnishings. At the other end of the spectrum, 27% of owners planning capital investments in the coming months are down two points since January.

What are the challenges?

Inflation in the US was 7.5% in the 12 months ending January, the largest 12-month increase since the period ending February 1982. In addition to inflation, companies are also grappling with supply chain disruptions and labor shortages, leading to lower income and sell for a lot.

Access to credit seems to indicate a promise. Only 2% of owners reported that their loan needs were not met, while 25% reported that all credit needs were met and another 60% that they were not interested in a loan. With regard to the latter, the average interest rate paid on short-term loans was 5.68%, 0.66 points lower than in January.

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