Inflation Fears Grip Small Business

Higher selling prices aren't enough to offset rising costs, owners say.

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More small-business owners are citing inflation as a top concern, with higher selling prices failing to offset rising costs, the National Federation of Independent Business reported this week.

Last month, owners continued to curb spending as expectations for improved sales and business conditions sunk to historic lows, according to the Washington-based advocacy group. Overall, the group's monthly small-business optimism index dropped 0.1 points to 89.2, a level not seen since the recession of the early 1980s. The index is based on a nationwide survey of the group's 600,000 members. Typically, about a quarter respond to the surveys.

The number of owners raising prices rose again last month, though fewer reported increased earnings. Job creation and capital outlays were also down, while employee compensation costs were up, the report said.

"The inflation problem is getting worse, not better, as the economy weakens," William Dunkelberg, the group's chief economist, said in a statement.

In contrast to reports from the Federal Reserve, Dunkelberg said the downturn was not creating credit or cash flow problems among small businesses. "It is a Wall Street issue," he said.

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