Inflation still small business owners' top concern, NFIB survey finds

Small business owners felt a little more optimistic about the economy last month, but a greater share said inflation is their biggest operating problem, according to National Federation of Independent Businesses (NFIB) data.

The NFIB reported Tuesday its Small Business Optimism Index, which is compiled monthly through a survey of small businesses, rose 2.2 points in July to 93.7. That is the highest reading since Feb. 2022, but the 31st straight month below the 50-year average of 98.

Meanwhile, the percentage of small business owners that cited inflation as their top problem rose four points from June, to 25%.

"Despite this increase in optimism, the road ahead remains tough for the nation’s small business owners," said NFIB chief economist Bill Dunkelberg. 

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"Cost pressures, especially labor costs, continue to plague small business operations, impacting their bottom line," Dunkelberg continued. "Owners are heading towards unpredictable months ahead, not knowing how future economic conditions or government policies will impact them."

The survey found fewer small businesses raised compensation for employees last month, with a seasonally-adjusted 33% reporting lifting pay, down five points from June to the lowest level since April 2021.

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At the same time, the net percent of owners raising average selling prices fell five points from June to a seasonally adjusted net 22%, while the share that planned price hikes for July fell two points to 24%, the lowest reading since April.

NFIB said its latest survey findings indicate inflation – which has been well above the Federal Reserve's 2% target rate for years – continues to plague Main Street.

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Although the consumer price index has fallen from a peak of 9.1%, it remains notably higher than pre-pandemic levels, coming in at 3% year-over-year in June.

When compared with January 2021, before prices began to spike, inflation is up more than 18%.