The share of small business owners reporting that inflation is the biggest problem facing their business grew in December to its largest since 1981, a survey released Tuesday showed.
Twenty-two percent of small business owners reported inflation as their biggest problem, according to the National Federation of Independent Business. At the start of 2021, just two percent said inflation was the biggest problem.
“Small businesses unfortunately saw a disappointing December jobs report, with staffing issues continuing to impact their ability to be fully productive,” said NFIB Chief Economist Bill Dunkelberg. “Inflation is at the highest level since the 1980’s and is having an overwhelming impact on owners’ ability to manage their businesses.”
Small business owners remain pessimistic about the future but slightly less so. Owners expecting better business conditions over the next six months increased three points to a net negative 35 percent. The indicator is down declined 23 points over the past six months.
Wages are going up, which could mean for stickier inflation than Federal Reserve officials expect. A net 48 percent (seasonally adjusted) of owners reported raising compensation, up four points from November and a 48-year record high reading. A net 32 percent plan to raise compensation in the next three months.
Thirteen percent cited labor costs as their top business problem, up three points and a 48-year record high reading, according to the NFIB. Twenty-five percent said that labor quality was their top business problem.
The net percent of owners raising average selling prices fell two points to a net 57 percent (seasonally adjusted). Unadjusted, 5 percent of owners reported lower average selling prices and 58 percent reported higher average prices. Eighty-five percent of wholesale reported higher prices, and none reported lower prices. Seventy percent of retailers reported raising prices, with seven percent reporting lower prices. In construction, 74 percent said they had raised prices and give percent said they had lowered prices.
The price hikes are far from over. A net 49 percent said they plan price hikes in the next six months.
The NFIB Small Business Optimism Index increased slightly in December to 98.9, up half a percentage point from November.