Dive Brief:
- Optimism among small businesses slumped last month below its 52-year historical average, dragged down by inflation and the low quality and availability of labor, the National Federation of Independent Business said Tuesday.
- An index of uncertainty, gauging the level of doubt about the future among small businesses, rose 1 point to 90, persisting 22 points above its historical average, NFIB found in a survey. Only 7% of business owners said it was a good time for expansion, 5 percentage points less than in August, the NFIB said.
- “Small business owners are proceeding with caution as they interpret how rising costs, interest rates and the difficulty in finding qualified employees are impacting their businesses,” NFIB Chief Economist Bill Dunkelberg said in a statement.
Dive Insight:
Small businesses fuel 44% of U.S. gross domestic product growth and, given their comparatively limited resources, are often the bellwether for challenges and setbacks across the broader economy.
During the past several months war-induced inflation and a crackdown on immigration have jarred small business performance and hiring efforts.
Twenty-six percent of small business owners ranked low labor quality and availability as their single most important problem, an increase of 3 percentage points compared with August, the NFIB said.
Nearly one out of every three small businesses (32%) said they could not fill job openings, 8 percentage points above the historical average, the NFIB said.
Among the 51% of small businesses trying to hire, 87% reported few or no qualified applicants, according to the federation.
“Our business could increase if we were able to hire skilled labor,” the owner of a services business in Maine told the NFIB.
One out of every five small businesses identified inflation as their No. 1 problem, an increase of 4 percentage points compared with August, the NFIB said.
“Fuel prices are killing us on our delivery trucks, as well as fuel surcharges on all freight coming into the store,” according to a retailer in Georgia quoted by the federation. “They also reduce the amount of disposable income our customers have to spend at our store.”
The war with Iran has catapulted energy prices, with the price for a gallon of diesel fuel surging during the past year by about 72% to $6.28 per gallon, according to AAA.
More broadly, a gauge of inflation — the personal consumption expenditures price index — rose 0.3% in August compared with July and by 3.4% on an annual basis, according to the Commerce Department.
U.S. consumer prices will likely rise 3.6% this year, according to the International Monetary Fund, well above the Federal Reserve’s 2% inflation target.
“How should monetary policy react” to soaring energy prices? IMF Chief Economist Silvana Tenreyro asked Tuesday during a news conference.
“In principle, it should be more restrictive in order to make sure that inflation returns to target,” she said.
“We expect inflation to pick up this year and also next year, and so it's important that central banks follow in their mandate, keep a sufficiently restrictive stance,” Tenreyro said.
