closed small business, inflation

Small business sentiment plunges to 48-year low as inflation worries rise

Small business confidence fell again in June as fears of runaway inflation persisted, with most business owners since 1980 saying rising prices were their biggest problem, according to a new survey released on Tuesday. .

The National Federation of Independent Businesses, a Tennessee-based association of small business owners, said its Small Business Optimism Index fell to 89.5 last month, the sixth consecutive month of below-average readings for 98 over 48 years.

The outlook is increasingly bleak for many small businesses, with the percentage of owners expecting better trading conditions over the next six months falling to the lowest level recorded in the 48-year-old survey. Expectations for improved trading conditions have deteriorated consecutively over the past six months.

The biggest problem, according to the survey, is inflation: 34% of small business owners said that rising prices were their most important problem in operating their business, the highest figure since 1980 .

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closed small business, inflation

In this April 2, 2020, file photo, a closure notice is displayed at The Great Frame Up in Grosse Pointe Woods, Michigan. (AP Photo/Paul Sancya, File/AP Images)

“As inflation continues to dominate business decisions, small business owners’ expectations for better business conditions have hit a new low,” NFIB chief economist Bill Dunkelberg said in a statement. “In addition to the immediate challenges facing small business owners, including inflation and labor shortages, the outlook for economic policy is also not encouraging as policy discussions have turned to tax increases and more regulations.”

JOB OFFERS REMAIN NEAR RECORD LEVELS

Searing inflation has forced the Federal Reserve to raise interest rates at the fastest pace in decades to rein in consumer demand, raising fears on Wall Street of slowing growth or even a possible recession. Policymakers approved a 75 basis point rate hike in June, the first since 1994, and are expected to raise rates another 75 basis points in July.

Companies also struggled to onboard new employees, with half of owners saying they couldn’t fill vacancies. The Labor Department announced last week that there were 11.3 million jobs open at the end of May. The number of available jobs exceeded 10 million for eight consecutive months; before the start of the pandemic in February 2020, the highest record was 7.7 million.

Federal Reserve

A man wearing a mask walks past the U.S. Federal Reserve building in Washington DC, U.S. April 29, 2020. (Xinhua/Liu Jie via Getty Images/Getty Images)

Among small businesses trying to hire new workers, 94% reported that few or no qualified people applied for the position they were trying to fill.

The Fed is trying to cool the labor market without pushing up unemployment too much.

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Faced with a labor shortage, small businesses have responded by raising wages: 48% of respondents said they raised wages in June, while 28% of owners plan to raise pay within three coming months. A total of 8% of business owners cited labor costs as the biggest issue facing their business, while 23% said it was labor quality .

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