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America’s small business owners are feeling less pricing pressure these days — but you’d forgive them for not going on TikTok and doing a victory dance.
A new survey from the National Federation of Independent Business found that 29% of small firms raised their prices in June, the lowest level since March 2021. While that’s 3 percentage points lower than three months prior, it’s still rather high.
Nightmare on Main Street
The past three years haven’t been kind to America’s 33 million-plus small businesses. A pandemic, tighter credit, and global crises like the invasion of Ukraine made keeping the lights on, the shelves stocked, and workers on payroll a Herculean task. “Inflation and labor shortages continue to be great challenges for small businesses,” NFIB Chief Economist Bill Dunkelberg said. “Owners are still raising selling prices at an inflationary level to try to pass on higher inventory, labor, and energy costs.”
Despite year-over-year inflation falling last month to 4% — its lowest level in two years — small businesses aren’t celebrating:
- Roughly 42% of small firms in the NFIB survey said they had openings that were hard to fill, and almost all said they had few or no qualified applicants for jobs. According to the US Chamber of Commerce, the US has nearly 11 million open jobs, while the unemployment rate remains low at 3.6%.
- There have already been 10 Fed rate hikes since March 2022, and there will likely be two more before the year is over, as both wage and price growth continue to outpace the Fed’s 2% inflation target (inflation data for June will be released Wednesday). In addition, 76% of small businesses say rising interest rates are limiting their ability to raise financing, according to the Small Business Index. More than 70% of business owners reported dipping into their personal finances to stay afloat.
When the Prices Go Up: Relief from rising prices may be short-lived, as 31% of owners said they plan to charge their customers more in the next three months. And as a group, they remain decidedly downcast. “Halfway through the year, small business owners remain very pessimistic about future business conditions and their sales prospects,” Dunkelberg said.