Inflation still worrying small business owners, NFIB survey shows

by | Oct 10, 2023

  • A new NFIB report reveals inflation remains a top concern for small business owners, with the Optimism Index falling for the 21st consecutive month below its historical average.
  • The data shows that business owners face difficulties in hiring qualified workers and are considering raising prices to offset sluggish sales and growing costs.
  • Survey details indicate a bleak outlook for real sales volumes, persistent labor challenges, and a continued trend of inflationary pressures.

A survey from the National Federation of Independent Business (NFIB) reveals that inflation remains a top concern for small business owners across the country. The NFIB Small Business Optimism Index fell by half a point in September to 90.8, marking its 21st consecutive month below its 49-year average of 98.

Bill Dunkelberg, NFIB Chief Economist, pointed out that “Owners remain pessimistic about future business conditions, which has contributed to the low optimism they have regarding the economy.” Dunkelberg emphasized that the sales growth among small businesses has slowed down, leading owners to consider raising their selling prices for financial relief.

According to NFIB State Executive Director Bill Herrle, “Inflation hurts everyone. It drives up the cost of owning and operating a small business, and it forces customers to think hard before buying anything except the essentials.”

The NFIB’s national survey revealed several concerning trends. Small business owners expecting better business conditions over the next six months deteriorated six points from August to a net negative 43%, although this is still 18 percentage points better than last June’s reading of net negative 61%.

A significant 43% of owners reported job openings that were hard to fill, reflecting a rise of three points from August. The data suggests that hiring remains a challenge due to the lack of qualified applicants. This hiring difficulty ties with the issue of labor quality, which, along with inflation, was cited by 23% of owners as the most significant problem in running their businesses.

Plans to raise compensation decreased three points from August to a net 23%, while the net percentage of owners raising average selling prices increased two points to 29%, signaling a continuation of inflationary trends.

The net percent of owners expecting higher real sales volumes improved marginally to a net negative 13%, indicating a bleak sales outlook. On the other hand, inventory gains improved four points to a net negative 3%. According to the NFIB, by industry, shortages are reported most frequently in the transportation, construction, retail, and services sectors.

The frequency of reports of positive profit trends was a net negative 24%, up slightly from August. Twenty-nine percent of owners reporting lower profits blamed weaker sales, 20% cited rising material costs, and 15% mentioned labor costs.

In terms of financing, only 2% of owners reported that all their borrowing needs were not met. Four percent noted that financing was their top business problem, while a net 26% reported paying a higher rate on their most recent loan.

The NFIB report provides a snapshot of the current challenges and considerations for small businesses, with inflation standing out as a persistent issue affecting both business owners and consumers alike. The survey was conducted in September 2023 and is released on the second Tuesday of each month.


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