Ask small business owners what's on their minds there's a good chance you'll hear about inflation. In fact, 26 percent of business owners surveyed in the National Federation of Independent Business's Small Business Optimism Index reported that inflation was their most pressing problem. The 4-point increase from December marked the highest reading since 1981.
Many small businesses owners are coping with challenges by increasing prices, which in turn further spurs inflation. Ultimately, 68 percent (seasonally adjusted) of business owners reported raising average selling prices -- the highest reading seen in nearly 50 years. Construction, manufacturing, wholesale and retail saw the most frequent price hikes.
The NFIB's overall Optimism Index has been a bit pessimistic these past few months. Historically, the index has averaged 98 points over 48 years, but came in at 95.7 in February, following a 97.1 January reading. That's not to say that small businesses lack assurance. By nature, confidence goes a long way for entrepreneurs, and fortunately, readings remain higher than they were during and after the so-called Great Recession, when the Optimism Index regularly scored in the 80s.
What is inflation anyway and why should you care? Inflation measures the rise in prices over a set period. As they say, a dollar doesn't buy what it used to. Go back seventy years and a candy bar cost five cents. Nowadays? Humble candy bars approach two bucks a pop.
Many economists consider slow, steady inflation a boon because it encourages people and businesses to spend rather than save money, thus encouraging economic growth. Stuff money in your mattress and over time it'll lose value, so best to spend or invest now. High inflation, however, makes it hard for folks to keep up with their bills and generates other headwinds.
Central banks often fight inflation by raising interest rates, making borrowing more expensive, which in turn cools the economy. This, too, could get business owners fretting.
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Article 2 (May 2022): NFIB survey finds that inflation is the biggest concern for small businesses
May 27, 2022
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