Small business owners are worried about the rising inflation in the US, and this appears to be a larger problem than Covid-19. They face survival issues when running their businesses, which is why they need to take unplanned measures.
According to the NFIB Small Business Optimism Index, business owners were slightly more optimistic in December, but at the same time, 22% of small business owners reported their concerns about inflation.
Inflation is painfully high
The main impact of inflation happens when the supply of the products is limited, and when demand remains high. This causes the prices to go up, which is why we are witnessing the highest inflation rates since the 1980s.
The current inflation rate hit a 40-year peak of 4.4%. This situation affects many business owners who depend on constant cash flow. When the purchasing power of money is reduced, we need more money to buy the same items, and this could be a huge problem in the overall economy.
The main cause of the inflation is the Covid-19 situation that affects all contributors to the market, not just small business owners. The pandemic continues to affect supply chains, and there are huge delivery delays. At the same time, the shipping costs have increased and the inventories are empty because of the huge supply issues. There are no adequate replenishments, and this is why the costs and prices go up.
There are certain signs that the supply problems will be solved soon, and the Institute for Supply Management conducted a survey that revealed that manufacturers had better deliveries from suppliers last month. This might be a sign that speaks about the improvement of the supply chains.
Some surveys say that despite the highest inflation in the last 40 years, the number of business owners who raised their average selling prices decreased by 2%. The number of business owners who plan to raise the prices also decreased by 5%. At the same time, the price increases will happen exponentially in the areas like construction, wholesale, and retail industries.
Goldman Sachs’ report emphasized the problems with inflation that affect small businesses. There are 86% of small business owners who struggle with inflation, while 84% of them experienced an increase in operating costs.
Last October, the optimism fell to a seven-month low, mainly because of the shortages of labor and supplies. The small business confidence fell to 98.2 points, which is a slip by 0.8 points.
Many troubles were made because of the businesses’ inability to get enough materials and supplies on time so they can operate normally. Even when they get the supplies, the business owners are forced to pay much higher prices because of the increased competition that is interested in the reduced supplies. This leads to dissatisfaction and many complaints of the business owners.
What does it tell about the future?
The biggest problems are the lack of workers for the unfilled positions and the shortage of supplies that are necessary for the business operations. As a response to the actual situation, we have the measurements of the Biden administration that are related to the working operations of the ports in Southern California. These ports now work 24/7 to ensure that all supplies are delivered.
The current inflation rate is very high, and it is related to the consumer price index of 280.19 points. These numbers speak about the current inflation that gives a headache to all business owners. If we apply some changes in the supply channels, we will see improvements. If not, the bad numbers will continue to rise, and we will witness even higher inflation rates. This is not good for small business owners and everyone else who is part of the economy.
