Small Business Owners Reporting Inflation as Biggest Problem

In February, the National Federation of Independent Business (NFIB) Optimism Index decreased by 1.4 points to 95.7, the second consecutive month below the 48-year average of 98. Twenty-six percent of owners reported that inflation was their single most important problem in operating their business, a four-point increase since December and the highest reading since the third quarter of 1981.

“Inflation continues to be a problem on Main Street, leading more owners to raise selling prices again in February,” said NFIB Chief Economist Bill Dunkelberg. “Supply chain disruptions and labor shortages also remain problems, leading to lower earnings and sales for many.”

Key findings include:

  • The net percent of owners raising average selling prices increased seven points to a net 68 percent (seasonally adjusted), a 48-year record high reading.
  • Owners expecting better business conditions over the next six months decreased two points to a net negative 35 percent.
  • Forty-eight percent of owners reported job openings that could not be filled, an increase of one point from January.
  • Inventory accumulation plans fell one percentage point, following a five-point decline in January, following the massive inventory build in Q4.

Price raising activity over the past 12 months has continued to escalate, reaching levels not seen since the early 1980s when prices were rising at double-digit rates. Unadjusted, 4 percent of owners reported lower average selling prices and 68 percent reported higher average prices. Price hikes were the most frequent in retail (79 percent higher, 4 percent lower), wholesale (77 percent higher, 4 percent lower), construction (73 percent higher, 3 percent lower), and manufacturing (72 percent higher, 6 percent lower). Seasonally adjusted, a net 46 percent of owners plan price hikes.

Thirty-seven percent of owners report that supply chain disruptions have had a significant impact on their business. Another 33 percent report a moderate impact and 21 percent report a mild impact. Only 8 percent of owners report no impact from the recent supply chain disruptions.

Seasonally adjusted, a net 45 percent of owners reported raising compensation, down five points from January’s 48-year record high reading. A net 26 percent of owners plan to raise compensation in the next three months. Eleven percent of owners cited labor costs as their top business problem and 22 percent said that labor quality was their top business problem.

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