SMB Confidence Drops Amid Inflation, Supply Chain Issues

American small business owners feel less confident about the country’s economy amid ongoing inflation and supply chain shortages, according to a survey from the National Federation of Independent Business (NFIB) released Tuesday (Feb. 8).

“More small business owners started the New Year raising prices in an attempt to pass on higher inventory, supplies and labor costs,” said NFIB Chief Economist Bill Dunkelberg. “In addition to inflation issues, owners are also raising compensation at record high rates to attract qualified employees to their open positions.”

Read more: Inflation Hits 7%, Highest Level in 40 Years

The NFIB Small Business Optimism Index fell slightly in January to 97.1, a 1.8 point drop from December. Inflation remains a concern for small businesses, with 22% of owners reporting that inflation was the most important problem facing their business. That figure was unchanged from December of last year, when inflation hit its highest level in 40 years.

The survey also found that the number of business owners expecting business conditions to improve over the next six months increased two points to a net negative 33%. Small business owners continue to be pessimistic about future economic conditions, as this indicator has fallen 13 points in the past half-year.

See also: Higher Labor Costs Loom as 2022 Challenge for Main Street SMBs

Meanwhile, 47% of owners reported job openings that couldn’t be filled, a decline of two points from December.

A net 50% (seasonally adjusted) of businesses reported raising compensation, a 48-year record high reading, while a net 27% say they will raise compensation in the next three months.

Eleven percent of owners cited labor costs as their top business problem and 23% said that labor quality was their top business problem.

Thirty-six percent of owners said supply chain disruptions have had a significant impact on their business, while 32% report a moderate impact and 22% report a mild impact. Only 9% of businesses said they saw no impact from recent supply chain disruptions.