Inflation Continues to Hinder Small Business Operations

Published: May 18, 2024
by Michael Guta
In Small Business News


The National Federation of Independent Business (NFIB) has released its Small Business Optimism Index for April 2024. The report reveals slight improvements but highlights ongoing challenges due to inflation and labor costs.

The NFIB’s Small Business Optimism Index rose by 1.2 points in April to 89.7, marking the first increase of the year. Despite this, the index the index has remained below the 50-year average of 98 for 28 consecutive months. Inflation remains the top concern for 22% of small business owners, although this is down three points from March.

Bill Dunkelberg, NFIB Chief Economist, stated:

“Cost pressures remain the top issue for small business owners, including historically high levels of owners raising compensation to keep and attract employees. Overall, small business owners remain historically very pessimistic as they continue to navigate these challenges. Owners are dealing with a rising level of uncertainty but will continue to do what they do best – serve their customers.”

Key Findings from the Report

  • Sales and Job Creation Expectations: The net percentage of owners expecting higher real sales increased by six points to a net negative 12%. A seasonally adjusted net of 12% of owners plan to create new jobs in the next three months, slightly up from March’s levels.
  • Price and Compensation Trends: The net percentage of owners planning price hikes in April fell to 26%, the lowest since April of the previous year. Meanwhile, 38% reported raising compensation in April, with 21% planning to do so in the next three months.
  • Labor Market Struggles: Forty percent of owners reported unfilled job openings, a three-point increase from March. Fifty-six percent of owners attempted to hire, but 91% reported few or no qualified applicants.
  • Capital Outlays: Fifty-six percent of owners reported capital outlays in the last six months, with expenditures on new equipment (38%), vehicles (24%), and facility improvements (16%).

Inventory and Sales Insights

  • Inventory Levels: The net percentage of owners reporting inventory gains rose to a net negative 6%. A net negative 4% viewed current inventory stocks as “too low,” and a net negative 6% plan inventory investments in the coming months.
  • Profit Trends: The frequency of reports of positive profit trends improved slightly but remained poor at a net negative 27%. Among those reporting lower profits, weaker sales, and rising material costs were the main reasons. Higher profits were attributed to increased sales volumes and seasonal changes.

Inflation and Labor Costs as Top Concerns

Inflation continues to be the leading problem for 22% of small business owners. Labor costs and quality also remain significant issues, with 11% citing labor costs and 19% citing labor quality as their top problems.

Financing Challenges

  • Borrowing Needs: Three percent of owners reported unsatisfied borrowing needs, and 28% had all their credit needs met. A net 8% found their last loan harder to obtain compared to previous attempts.
  • Interest Rates: Four percent of owners reported financing as their top business problem, with 21% paying higher rates on recent loans, up four points from March.

Image: Envato

Michael Guta
Michael Guta is the Assistant Editor at Small Business Trends and has been with the team for 9 years. He currently manages its East African editorial team. Michael brings with him many years of content experience in the digital ecosystem covering a wide range of industries. He holds a B.S. in Information Communication Technology, with an emphasis in Technology Management.

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