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Small businesses are growing concerned about the fate of the U.S. economy as the nation faces high inflation, a lack of supply and labor chains, and rising interest rates.
According to a survey conducted this month by business training and advisory services firm Vistage Worldwide Inc., 57% of small business owners predict that the US economy will only get worse next year, which coincides with the April 2020 low self-confidence mark. Last month, 42% of small business owners had the same gloomy views on the economy.
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Businesswoman closes business due to COVID-19 blockade. (iStock / iStock)
The survey, first published by The Wall Street Journal, is part of a broader confidence index that revealed the biggest drop in May from the same period last year since COVID-19 closed in spring 2020. Although prices continue to rise, the number of small businesses expecting the increase in revenue in the following year fell to 61%, which is a significant decrease compared to the level in May 2020 of 79%.
Data showing that small business owners have a pessimistic view of the economy rely on responses from a variety of sectors, including manufacturing and consumer products and services.
Even large corporations are feeling the effects of supply chain stagnation, rising prices and labor shortages.
Walmart reported an increase in sales in the last quarter, but noted that higher costs for products, employees and the supply chain harmed the company’s profits.
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In this photo from May 6, 2020, a woman walks past a closed barber shop in Cleveland. (AP Photo / Toni Dejak, file) (AP Photo / Toni Dejak, File)
Target’s profit was lower in quarterly earnings released earlier this month as inflation and supply chain costs limited profits.
Supply chains also see indicators that consumers are starting to reduce consumption, especially at discretionary purchases, amid higher gas prices and other necessities.
However, small companies do not have the financial flexibility that larger companies have, so they often struggle to overcome economic problems. Many small business owners said their companies were hurt by the COVID-19 pandemic and a number of economic challenges. State aid programs that have helped alleviate the economic burden on businesses have largely run out of funds.
Yet few small businesses remain optimistic or neutral about the economy due to factors such as low unemployment, strong consumer spending and demand for workers at historic highs. The survey showed that 12% of companies expect the economy to improve, and another 28% said they believe conditions will remain roughly the same.
In this photo on Tuesday, November 27, 2018, the bartender is talking to customers at the Gotham Bar and Grill in New York City. (AP Photo / Mari Altaffer / AP Images)
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Small businesses with less than 50 workers struggle with the number of employees. These companies suffered a decline in employees in February and April, while larger companies continue to add employees, according to data on payrolls from ADP.
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A Goldman Sachs survey in April found that nearly 88 percent of the more than 1,100 small business owners surveyed said difficulties in hiring workers had worsened or remained the same since January. According to the survey, more than three-quarters of small business owners who reported challenges in hiring skilled workers said they found it difficult to compete with larger businesses in terms of wages and benefits.
The Wall Street Journal contributed to this report.