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Friday, January 27, 2023

Small business owners eye 2023 with a grain of salt, online prices continue to fall | Economy

Small business owners are expecting a tough 2023, even as inflation has eased somewhat, the National Federation of Independent Business said Tuesday.

The organization’s monthly small business optimism index fell 2.1 points in December to 89.8 compared with 91.9 in November.

As was the case a month earlier, inflation remained the top concern with almost a third, or 32%, reporting it as such. However, at the same time, the percentage of businessmen who said they were raising prices fell by 8 points.

“Overall, small business owners are not optimistic about 2023 as sales and business conditions are expected to deteriorate,” said NFIB Chief Economist Bill Dunkelberg. “The owners are managing several economic uncertainties and persistent inflation and continue to make business and operational changes to compensate.”

Still more than half of those surveyed, or 55%, said they were trying to hire new employees in December, even though 93% reported having few or no qualified applicants.

Political cartoons about the economy

More than a quarter, or 27%, said they planned to raise their workers’ wages in the next three months, a slight decline from November.

Taken together, the survey paints a picture of a difficult time for small businesses as they face the twin challenges of high inflation and rising borrowing costs, as the Federal Reserve continues to raise interest rates to combat inflation. Small businesses are often more exposed to higher borrowing costs, since they are more dependent on banks and other lenders to finance their operations and lack the access to capital markets that larger companies have.

The percentage of owners who expect better business conditions in the next six months fell by 8 points.

Separately, a survey of online spending found that prices fell 1.6% year-over-year in December, the fourth consecutive month of price declines. Computer prices fell 16.2%, while other electronics saw price drops of 12%. Home appliances were down 2.1%, while toys were down 7.1%.

The declines reflect the changing environment for online shopping. After skyrocketing during the coronavirus pandemic when many people were in lockdown, online shopping has returned to a more normal pattern and prices are no longer staying high. Aggressive discounts during the holiday season also drove prices down.

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