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Economic Report: High inflation has become very deflating for small businesses, NFIB says

The largest number of small businesses since 1981 say high inflation is their chief worry — and many are increasing prices to offset their own rising costs.

Optimism among small businesses fell in February to a one-year low, the National Federation of Independent Business said on Tuesday.

The lobbying group’s optimism index dropped 1.4 points to 95.7. Just last summer, the index had topped 102.

“Inflation continues to be a problem on Main Street, leading more owners to raise selling prices again in February,” NFIB chief economist Bill Dunkelberg said.

“Supply chain disruptions and labor shortages also remain problems, leading to lower earnings and sales for many.”

Some 26% of small-business owners said high inflation was their No. 1 problem — the highest reading since the third quarter of 1981.

The rate of U.S. inflation reached 7.5% in the 12 months ended in January.

Inflation was also extremely high 41 years ago, climbing to as high as 11%.

With their own costs rising, small businesses are passing on price increases to their customers.

A net 68% of owners said they were increasing prices, the highest reading in the history of the 48-year-old survey.

Small businesses probably can’t expect much relief soon, either.

The Russian invasion of Ukraine has sent the cost of oil
CL.1,
+2.76%
,
wheat
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-0.17%

and other commodities soaring. These price increases are expected to keep inflation high through the spring.

The survey indicated small firms don’t expect much improvement soon. The percentage of those who think business will be better six months from now fell a few points to a net negative 35%.

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