June 9, 2004 -- Growing inflation concerns are cutting into small businesses' optimism, according to the National Federation of Independent Business.
The NFIB's Small Business Optimism Index came in at 104.5 in May, down 0.9 points from April. A reading above 100 is considered strong and the index has remained above that level for 14-months straight.
The dip, says the NFIB, is a result of fears of worsening inflation. In recent months, 6 percent of respondents have pointed to inflation as their most pressing problem, well above the 1 or 2 percent that typically cite rising prices as their top concern.
In September 2003, virtually no firms were raising prices, according to the report. Now, the NFIB finds that hikes are prevalent in all industries.
The survey shows that more small firms are passing higher costs on to their customers, as 25 percent reported higher selling prices, up from 22 percent in April. Additionally, 30 percent plan on raising prices in the future, double the number one year ago.
Despite rising prices, demand for goods and services has stayed strong. More than a quarter of those surveyed experienced increased profit. Of those reporting gains, 62 percent attributed them to strong sales, while only 12 percent credited higher selling prices.
Separately, the survey pointed to steady, if not strong, job creation as indicated in an NFIB report last week.
MATT QUINN contributes to the Wall Street Journal's corporate finance blog. He has also written extensively about banking and corporate finance for publications including Inc., American Banker, and Financial Week. He lives in Brooklyn, New York.