Business owners and executives are increasingly concerned about the impact of record-high inflation and supply-chain constraints on their companies, according to two new surveys.
As inflation hit its highest rate in 40 years, 85% of small business owners say they are worried about it hurting their operations, up from 74% in the fourth quarter of last year, according to new findings from the MetLife and U.S. Chamber of Commerce Small Business Index.
In that survey, 44% of small business owners said they are very concerned, up 13 percentage points since last quarter.
In response to inflation that hit 7.5% in January, 67% of small business owners have raised prices and 41% have reduced staff.
“Having survived the pandemic, now small business owners are being hit with surging inflation,” said Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce. “It’s limiting their purchasing power and forcing small businesses to raise their prices and absorb higher costs within already thin margins. We need policymakers to pursue policies that will reduce inflationary pressures, including addressing the worker shortage crisis, expanding trade and reducing tariffs.”
President Biden and congressional Democrats are blaming inflation in part on price-gouging by some industries, including oil and gas producers. Many economists say inflation is primarily a result of surging demand, combined with product shortages and monetary policy that pumped trillions into the economy in the past two years.
Congressional Republicans also blame the administration and Democratic lawmakers for passing a $1.9 trillion pandemic relief package last year, which came on top of nearly $3 trillion in previous pandemic aid.
More than one-third, 39%, of small business owners said they have taken out a loan in response to high inflation. But the cost of borrowing is about to rise, too, with Federal Reserve Chairman Jerome Powell telling Congress this week that the central bank will likely raise its benchmark rate by a quarter percentage point at its meeting on March 15-16.
Mr. Powell said the Fed is raising rates to curb inflation, and he raised the possibility of more rate hikes this summer. The action is intended to tamp down demand.
Inflation concerns and supply-chain problems were also cited for a drop in optimism about the economy among business executives in a new survey by the Association of International Certified Professional Accountants. The survey gets input from chief executive officers, chief financial officers, controllers and other certified public accountants at U.S. companies.
In that survey, 36% of business executives expressed optimism in the U.S. economy over the next 12 months, down from 41% last quarter. The survey concluded the day before Russia launched its military invasion of Ukraine.
Inflation was the top concern among respondents in the AICPA survey for the second straight quarter, with 42% saying labor costs are the most significant risk and 31% citing raw material costs.
“Our survey shows significant concerns about inflation and lingering supply chain issues from the pandemic,” said Ash Noah, a senior official with AICPA. “With Russia’s invasion of Ukraine and the resulting economic and political turmoil, we expect additional stresses throughout the global economy. We don’t know yet the full impact on energy and commodity prices and general trade, but the levels of risk and uncertainty have increased for finance managers.”