Inflation pounds small business optimism to 48-year low

Dive Brief:

  • The proportion of small business owners expecting brighter conditions for their companies slumped to the lowest level in 48 years, the National Federation of Independent Business (NFIB) said, primarily blaming the worst inflation in four decades.
  • Nearly one out of three small businesses (32%) identified rising prices as their biggest problem — the highest reading since late 1980, NFIB said, describing survey results. Companies cited quality of labor and taxes as their second and third most worrisome challenges.
  • “Small business owners are struggling to deal with inflation pressures,” NFIB Chief Economist Bill Dunkelberg said. “The labor supply is not responding strongly to small businesses’ high wage offers and the impact of inflation has significantly disrupted business operations.”

Dive Insight:

CFOs concerned about the harm from inflation have found support in recent months from the Federal Reserve. The central bank this month reduced stimulus by raising the main interest rate by a half point and announcing plans for trimming its $9 trillion balance sheet.

“Rising inflation, increasing borrowing costs and ongoing geopolitical tensions pose risks to the economic outlook, particularly for businesses that were most affected by the pandemic,” the central bank said in a semi-annual report on financial stability.

Many big companies clawing back from coronavirus lockdowns carry too much debt, the central bank said. Gross leverage, or the ratio of debt to assets, persists at a record level for sectors hit hardest by the pandemic including airlines, restaurants and hospitality.

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