PYMNTS Intelligence Banner June 2024

Inflation Remains Top of Mind for Small Businesses as 2024 Kicks Off

The cost of doing business is top of mind for Main Street’s small businesses.

The National Federation of Independent Business detailed in its Tuesday (Jan. 9) survey of small business optimism that small businesses, in the words of NFIB Chief Economist Bill Dunkelberg are “very pessimistic” about their prospects this year.

The latest survey reading came in at 91.9, up 1.3 month on month in December, but marking the 24th straight month below the survey’s 50-year average of 98.

Nearly a quarter of respondents said that inflation remains the most important problem when it comes to operating their businesses, shouldering aside labor quality as the highest-ranking concern.

The NFIB said the tally of small business owners expecting better business conditions over the next six months improved six points from November but remains a “net negative 36%.” The data shows that only a relatively small percentage of owners have boosted their selling prices — at 25% — implying that higher input costs will be only partly passed along to consumers. A net 32% of small business owners plan price hikes in the next three months. The frequency of reports of positive profit trends was a net negative 25%, although that was seven points better than the previous month.

Eyeing Profits — and Pressure

To get a sense of how operating costs are affecting operating income, the NFIB noted that among the owners reporting lower profits, 31% blamed weaker sales, 17% blamed the rise in the cost of materials, 16% cited lower prices and 9% cited labor costs.

A “pessimistic” outlook may also be impacting the ways in which small- to medium-sized business (SMB) owners are thinking about credit. The NFIB remarked that 25% of respondents reported “all credit needs met and 61% said they were not interested in a loan.” A net 8% of small businesses reported their last loan was harder to obtain than their previous forays into the credit markets.

PYMNTS Intelligence data coming into the new year found that Main Street SMBs that rely heavily on eCommerce are more optimistic about top-line prospects.

In the latest quarterly report, 38% of Main Street SMBs that sell mostly in physical stores said their revenues will grow in 2024. That share rose to 57% for those who sell mostly online.

Thirty-one percent of Main Street SMBs will not seek traditional avenues of financing in the next 12 months, a separate report found. Instead, they are planning to use business credit cards — or have them at the ready — to help manage their business expenses in 2024.