A recent survey from the Chamber of Commerce and MetLife found that 85 percent of small business owners are concerned about the effects of the highest inflation to hit the United States in four decades.
Tom Sullivan, the Chamber vice president of small business policy, said in a statement: "Inflation is top-of-mind for small businesses as it continues to limit their purchasing power, forcing small businesses to raise their prices and absorb higher costs within already thin margins."
To cope with the increasing prices, around two-thirds of respondents said they were raising the costs for consumers. Of those interviewed, small retailers were more likely to report raising the prices of their goods and services compared to those in professional services, manufacturing or other.
One in three small business owners also ranks inflation as the biggest financial challenge, while others are concerned about supply chain disruptions, Wuhan coronavirus (COVID-19) safety protocols and compliance, revenue and employee well-being and morale. (Related: Biden bans U.S. imports of Russian oil in ongoing war on AMERICAN consumers as gas prices skyrocket further.)
The persistent labor shortage also weighed on small businesses as owners were forced to hike wages in an increasingly competitive market. Some economists said rising wages could fuel higher inflation. Given that consumer prices surged 7.5 percent in January alone, this is a jarring possibility.
The combination of high inflation and the necessity of increasing wages has fueled the possibility of a wage-price spiral, a phenomenon of the 1970s that showed high inflation leads to pay hikes, which in turn leads to more spending and higher prices.
Sullivan noted that it is the job of the administration and Congress to find ways to ease the burden on small businesses by reducing inflationary pressures and addressing the worker shortage crisis.
This inflation spike has severely affected the approval ratings of President Joe Biden, whose rating plunged as consumer prices soared. The White House has repeatedly blamed the price hikes on supply chain bottlenecks and pandemic-related disruptions, but Republicans have pinned it on his massive spending.
Despite headwinds, however, small businesses said they remain relatively optimistic about their operations and expectations for the future, with three in five owners saying their businesses remain in good health.
Six in 10 small businesses raised average selling prices in January
The 61 percent of small businesses that raised average selling prices in January marked a 48-year-high. Price hikes were often seen in wholesale, manufacturing, retail and construction.
Advocacy group NFIB, which is made up of small business owners across the U.S., also found that 47 percent of owners cannot fill job openings. Meanwhile, a net 50 percent of small business owners reported raising worker compensation.
"More small business owners started the New Year raising prices in an attempt to pass on higher inventory, supplies and labor costs. In addition to inflation issues, owners are also raising compensation at record high rates to attract qualified employees to their open positions," said NFIB chief economist Bill Dunkelberg.
The U.S. inflation jumped at its fastest pace in nearly 40 years at the end of 2021, and a seven percent spike from 2020 with prices rising fast for cars, gas, food and furniture as part of a rapid recovery from the COVID-19 recession. With infusions from government aid and low-interest rates, demand for goods spurred, while vaccinations gave people the confidence to dine out and travel.
With an increase in job opportunities, the Federal Reserve may find a reason to raise interest rates and pull back its support to the economy in an effort to reduce inflation. (Related: Biden’s globalist agenda sees Americans suffering from gas prices and more.)
However, as inflation remains high, the NFIB predicts that there should be a slowdown in the second half of 2022 as some of the economic disruptions get untangled.
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