Inflation Remains a Headache for Small Business Owners

Inflation remains small businesses’ chief worry, according to a new survey showing their optimism fell in February.

The National Federation of Independent Businesses’ Optimism Index fell to 89.4 in February. It’s been below the 50-year average of 98 for 26 straight months. Twenty-three percent of small business owners said inflation was their top problem, up three points from January, when labor quality was the chief concern.

Inflation remains elevated. Prices rose 0.4 percent from January to February, up from the previous month’s 0.3 percent pace, the Labor Department said last week. Compared with a year earlier, consumer prices rose 3.2 percent last month, slightly higher than in January.

Excluding food and energy prices, so-called “core” prices also climbed 0.4 percent from January to February. That’s faster than what’s needed to bring inflation down to the Fed’s 2 percent target. Core inflation is watched closely for a read on where inflation is likely headed.

As they grapple with inflation, small business owners are spending less. Fifty-four percent of owners reported capital outlays in the last six months, down five percentage points from January. Of those making expenditures, 35 percent reported spending on new equipment, 23 percent acquired vehicles, and 15 percent improved or expanded facilities.

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