Small business optimism hits 11-year low as inflation fears won’t go away

Small
business
confidence
hit
its
lowest
level
in
more
than
11
years
for
March
as
proprietors
worried
that
inflation
is
still
very
much
a
problem.

At
a
time
when
other
data
points
show
inflation
receding,
the
National
Federation
of
Independent
Business
reported
Tuesday
that

its
survey
showed
a
reading
of
88.5,
down
nearly
a
point
from
February
and
the
lowest
since
December
2012.

A
quarter
of
all
respondents
reported
that
rising
costs
were
the
biggest
problem.

“Small
business
optimism
has
reached
the
lowest
level
since
2012
as
owners
continue
to
manage
numerous
economic
headwinds,”
NFIB
Chief
Economist
Bill
Dunkelberg
said. “Inflation
has
once
again
been
reported
as
the
top
business
problem
on
Main
Street
and
the
labor
market
has
only
eased
slightly.”

A
quarter
of
all
respondents
cited
inflation,
and
in
particular
higher
input
and
labor
costs,
as
their
most
pressing
issue.
A
net
28%
reported
raising
average
selling
prices
for
the
month
and
33%
planned
additional
price
hikes,
according
to
seasonally
adjusted
data.

As
part
of
those
escalating
costs,
a
net
38%
said
they
raised
compensation,
up
3
percentage
points
from
the
February
reading
that
was
the
lowest
since
May
2021.
The
Labor
Department
on
Friday
reported
that

average
hourly
earnings
rose
0.3%
in
March
and
4.1%
from
a
year
ago.

The
survey
comes
with
other
indicators
showing
that
inflation,
while
not
eradicated,
is
at
least
receding.

A
Commerce
Department
measurement
of

personal
consumption
expenditures
prices
put
the
annual
inflation
rate
at
2.5%
in
February.
The
measurement,
which
the
Federal
Reserve
uses
as
its
main
inflation
gauge,
showed
a
2.8%
level
when
excluding
food
and
energy,
which
policymakers
prefer
as
a
better
sign
of
longer-run
trends.

The
consumer
price
index,
a
more
widely
watched
figure
by
the
public,
will
be
released
Wednesday
and
is
expected
to
show
a
3.4%
headline
rate
and
3.7%
on
core.
Fed
policymakers
target
2%
annual
inflation.

Inflation
expectations
have
been
fairly
well-anchored
in
recent
months.
A
New
York
Fed
survey
on
Monday
showed
respondents
for
March
expected
a
3%
rate
over
the
next
year,
unchanged
from
February.
The
three-year
outlook
rose
slightly
but
the
five-year
expectation
decreased.

However,
the
survey
did
show
a
big
jump
in
the
expectations
for
rent
increases
—
by
8.7%
over
the
next
year,
a
2.6
percentage
point
surge
from
February.
Declining
shelter
inflation
is
at
the
core
of
the
Fed’s
thesis
that
inflation
will
continue
to
ebb
toward
the
central
bank’s
2%
target,
allowing
for
interest
rate
cuts
later
in
the
year.

Fed
survey
respondents
also
said
they
expect
prices
to
rise
substantially
for
most
other
major
components.
They
see
gas
prices
up
4.5%
in
the
next
year
and
food
up
5.1%,
both
0.2
percentage
points
higher
than
the
February
survey.