Inflation is the top issue for a record share of US small businesses

[NEW YORK] Inflation is the single-most important problem plaguing US small businesses, dragging down a gauge of sentiment among owners to the lowest in more than a year.

Twenty-six percent said inflation was the top issue encountered in operating their business in February, the most in monthly data back to 1986, the National Federation of Independent Business said on Tuesday (Mar 8).

The group's optimism index fell to 95.7, the lowest since January 2021 and below the median estimate in a Bloomberg survey of economists.

An even greater proportion reported raising prices to combat high costs of materials and labour, a fresh record. Price hikes were most frequent in retail, wholesale, construction and manufacturing.

"Inflation continues to be a problem on Main Street, leading more owners to raise selling prices again in February," NFIB chief economist Bill Dunkelberg said in a statement. "Supply chain disruptions and labour shortages also remain problems, leading to lower earnings and sales for many."

The net share of owners expecting higher sales in the next 3 months dropped to minus 6 per cent, the lowest in a year. Fewer owners reported plans to hire and increase capital spending compared to the prior month.

Labour also continues to be a top concern. A net 48 per cent of all owners reported job openings they could not fill in February, hovering near a record high. Of the 61 per cent of employers hiring or trying to do so, 93 per cent reported few or no qualified applicants for those positions.

The data echo other recent reports. A survey from MetLife & US Chamber of Commerce showed one in 3 small businesses now say inflation is the biggest challenge facing the community.

Companies with fewer than 50 employees are struggling to keep up with the wages and benefits needed to attract talent, according to an ADP Research Institute report last week. BLOOMBERG