Small business owners, fretting over inflation, set to hike prices
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SMALL BUSINESS OWNERS, FRETTING OVER INFLATION, SET TO HIKE PRICES
The mood among small business owners in the U.S. ticked a bit lower in September, logging the sixth monthly decline this year, according to the National Federation of Independent Business (NFIB).
NFIB's Optimism index (USOPIN=ECI) forfeited July and August gains to land at 98.8, but managed to remain above its 51-year average of 98.
On the other hand, the uncertainty index jumped by points to 100, the fourth-highest reading ever amid the roller coaster of uncertainties related to President Trump's erratic policies.
"While most owners evaluate their own business as currently healthy, they are having to manage rising inflationary pressures, slower sales expectations, and ongoing labor market challenges," writes Bill Dunkelberg, NFIB's chief economist. "Although uncertainty is high, small business owners remain resilient as they seek to better understand how policy changes will impact their operations."
Digging deeper, forward expectations regarding business conditions and sales weakened, supply chain worries grew more acute, and an increasing percentage of survey participants reported that inflation is their most important problem and owners who viewed current inventories as "too low" dropped 7 points to a net -7, the biggest monthly drop on the survey's history.
Even so, as outpointed by Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, only 403 companies participated in last month's survey, 27.9% fewer respondents than a year ago.
"That leaves room for a big non-response bias, and one that likely flatters the true conditions for small businesses, given that the administrative and financial burden of the tariffs probably is discouraging many from replying," Allen says.
Taxes and labor were identified as the "most important problems," as inflation fears grew stronger.
One third of business owners reported raising average selling prices. A net 31% of respondents said they plan to do so.
The graphic below shows intentions to raise prices are higher than they've been in over a year, despite the fact that inflation worries (and inflation itself) have been steadily on the wane.
It's worth noting that the NFIB is a politically active membership organization whose PAC skews heavily Republican, according to the Center for Responsive Politics/opensecrets.org.
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