The tidal waves of inflation, supply chain bottlenecks, and shortages of both goods and workers that have soaked the U.S. economy have hit small businesses especially hard. Many larger businesses often have deep connections to suppliers and distributors, as well as more leverage when it comes to negotiating over prices, that smaller, independent businesses lack.
Twenty-two percent of small business owners say inflation is their most important business problem, according to the NFIB’s January survey. That matched the December level, which was the highest level since 1981.
The net percentage of owners raising average selling prices jumped four points to 61 percent, the highest reading since the fourth quarter of 1974.
“More small business owners started the New Year raising prices in an attempt to pass on higher inventory, supplies, and labor costs,” NFIB Chief Economist BIll Dunkelberg. “In addition to inflation issues, owners are also raising compensation at record high rates to attract qualified employees to their open positions.”
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A net 50 percent of businesses reported raising compensation in January, a 48-year record high. Twenty-seven percent reported plans to raise compensation in the next three months. Eleven percent of owners said labor costs were the biggest problem for their businesses and 23 percent said labor quality was the biggest problem.
Owners of small businesses remain pessimistic about future economic conditions, although the share of owners expecting better business conditions in the next six months increased two points to a negative 33 percent in January. Over the past six months, this measure has declined 13 points.
The NFIB”s small business optimism index declined in January to 97.1 from 98.9 in December.