The NFIB Research Center released a new survey today assessing the impact inflation is having on small businesses nationwide.
Overall, over half (56 percent) of small employers reported that inflation is having a substantial impact on their business while about a third (35 percent) reported a moderate impact. Three quarters (75 percent) of owners reported that inflation pressure is getting worse, a quarter (25 percent) reported about the same, and 1 percent reported it easing up.
“Inflation has set in on Main Street and owners across the country continue to make business decisions in response,” said Holly Wade, Executive Director of NFIB’s Research Center. “As owners manage the highest inflation rate in decades, they are also managing an ongoing worker shortage and supply chain disruptions, which is hurting their businesses and consumers.”
State-specific data is unavailable, but NFIB Alabama Director Rosemary Elebash said, “Our members here say inflation and increased labor costs are driving down any profits for the business. And when the business loses profit, it affects community involvement and contributions to local charitable causes.”
Energy and Gas Costs:
- Nearly all (96 percent) of small employers reported higher gas and fuel prices have some degree of a negative impact on their business.
- Forty-one percent of small employers characterized the cost of energy used in their business (electricity, natural gas, gasoline, and fuel oil) as one of the five largest business costs they have.
- About a quarter (28 percent) reported it being one of the two or three largest business costs they have and 6 percent reported it being the single largest business costs in their business.
- When asked what activities business energy costs are primarily linked to, about a quarter (26 percent) said heating and/or cooling. Four percent said lighting, 37 percent said operating vehicles, 29 percent said operating equipment and/or processes, and 4 percent said “other.”
- About three-quarters (77 percent) of small employers reported that delivery services are being impacted by higher gas and fuel prices. Seventy-two percent reported commuting to/from work, and another 71 percent reported employee travel for work purposes. Sixty-three percent reported equipment operation, and 62 percent reported other vehicle use.
- Over three-quarters (79 percent) of small employers reported that rising “fuel (gasoline, diesel, fuel oil, etc.)” prices are a substantial contributor to higher costs.
- Seventy-two percent of small employers reported “inventory, supplies, and materials” as being a substantial contributor to higher costs.
- Under a third (31 percent) of small employers reported “labor” being a substantial contributor to higher costs.
- Four percent of employers report “rent” being a substantial contributor.
- Eighty-six percent of small employers are increasing the prices of their goods or services. Of those increasing prices, 7 percent reported that the effort was absorbing all their total cost increases, 36 percent reported most, about half (47 percent) reported some, and 9 percent reported a little.
- Eighty-two percent of small employers absorb costs through lower business earnings to some degree. Nine percent reported this absorbing all their total cost increases, 28 percent most, 50 percent some, and 11 percent a little.
- Less than a fifth (17 percent) of small employers have reduced the quantity of materials or goods used to produce final product(s) to absorb higher costs. Seven percent reported this absorbing all their total cost increase, 23 percent most, 52 percent some, and 15 percent a little.
- Twenty-three percent of employers switched to lower cost materials or goods (inventory, supplies, etc.) to produce final product(s) and services, with 4 percent reporting this absorbing all total costs.
- Twenty-nine percent of small employers are taking on debt to finance higher costs with 9 percent reporting it is absorbing all total cost increases.
- Thirty-one percent of small employers are reducing employee related costs, such as compensation, number of employees, hours worked, etc. Nine percent of owners reported that this covered all the cost increase, 11 percent reported most, 62 percent some, and 18 percent a little.
- Seventy percent of small employers are planning to raise average selling prices in the next three months and 17 percent were not sure.
- Thirty-eight percent reported they would raise prices by 10 percent or more and about half (44 percent) reported 4-9 percent.
- Almost three-quarters (71 percent) of small employers raised their average selling prices in the last three months.
- Another three-quarters (73 percent) of owners reported assessing the adequacy of their price levels of the goods or services they provide more frequently than twice a year. Thirty-three percent reported assessing price levels weekly, 23 percent monthly, and 17 percent every few months.
- About half (45 percent) of small employers have contracts with customers with fixed price agreements.
Supply Chain Disruptions:
- Almost all (96 percent) of small employers reported supply chain disruptions having some degree of impact on their business.
- A little over half (56 percent) reported being unable to acquire a key input needed to produce a good and service offered to their customers in the last six months.
- Sixty-seven percent of owners reported that higher interest rates are having some degree of a negative impact on their business.
- Thirty-four percent reported higher interest rates impacting their business by increasing the cost of financing. Fourteen percent said increasing the cost of financing for their customers, 42 percent responded slowing general consumer spending, and 5 percent responded reducing financing options.
- When asked if they anticipate that higher interest rates will slow down consumer spending over the next six months, 43 percent responded significant slowdown, 39 percent moderate slowdown, and 14 percent mild slowdown.
The survey was conducted from June 31, 2022 – July 7, 2022. A random sample of NFIB’s membership was drawn, generating 462 responses of small employer business owners.
Read the full survey here.