Economic Report: Small businesses haven’t been this pessimistic in 48 years — and high inflation to blame

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Small businesses are more pessimistic than ever because of high inflation: The number of owners who expect business to improve in the next six months fell to the lowest level in 48 years.

Those are the results of the latest survey of the National Federation of Independent Business, the nation’s largest lobbying group for small companies.

THE NFIB’s small-business optimism index fell 0.1 points in May to 93.1, marking the fourth decline in five months.

The last time the index was that low was early in the coronavirus pandemic in the spring of 2020. Just one summer ago , the index had topped 102.

Small and large companies alike are coping with high prices, ongoing shortages of supplies and difficulty finding good help for hire.

With their own expenses rising, the number of small businesses that plan to raise prices rose again in May to match the highest level in the 48-year history of the survey.

Even after raising prices, a majority of small businesses say profits are declining. One-third blamed higher costs and one-quarter cited slowing sales.

“Small business owners remain very pessimistic about the second half of the year as supply chain disruptions, inflation, and the labor shortage are not easing,” said NFIB Chief Economist Bill Dunkelberg.

The negative NFIB survey is the latest in a series reports showing the persistence of inflation and dimming optimism about the economy.

The U.S. is still growing, but Fed is moving to swiftly raise interest rates to try to quell inflation. The worry is that more aggressive rate hikes would slow the economy and potentially even tip it into recession.

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