The fight against inflation went well for the Federal Reserve and the economy for much of last year and into 2024, but one important segment of the population remained unconvinced by the progress made in lowering prices: small business owners.
Meanwhile, more influential parties are coming around to a view that small businesses are stubbornly advocating and that is closer to reality: Inflation is not falling fast enough. On Wednesday, Federal Reserve Chairman Jerome Powell admitted that after three months of disappointing inflation data this year, there has been “no further progress.” Market traders who not long ago were euphoric about rate cuts and predicted up to six rate cuts by the Fed this year are now more likely to expect one or two cuts at most.
Disappointment over inflation is nothing new for small business owners, and their frustration with high prices is on the rise again, according to the CNBC|SurveyMonkey Small Business Survey for the second quarter of 2024.
One in four (24%) small business owners tell CNBC they think inflation has peaked. It was 29% in the previous quarter and is back to where economic sentiment was a year ago. The percentage of small business owners who expect inflation to rise from now on is also trending upward – 75% this quarter, up from 69% in the first quarter.
“Small business owners are the engine of our economy, and the data shows they are still pessimistic about beating inflation,” said Lara Belonogoff, senior director of brand management and research at SurveyMonkey, in a statement on the release of the second-quarter survey.
This CNBC|SurveyMonkey online survey was conducted April 8-12, 2024, among a nationwide sample of 2,130 self-identified small business owners ages 18 and older.
Despite the positive market reaction to Fed Chair Powell's comments following Wednesday's FOMC meeting – Powell all but ruled out at least another rate hike this year – small business confidence in the Fed has fallen. Last quarter, just over a third (35%) of business owners said they had confidence in the Fed. This figure has not dropped to 31%, as it did in the second quarter of last year.
“Inflation clearly remains a major concern for small businesses,” Isabel Casillas Guzman, head of the U.S. Small Business Administration, said in an interview with CNBC's Kate Rogers at the Small Business Playbook virtual event on Thursday. “We've tried to make sure the SBA is more accessible to creditworthy borrowers. Half of the businesses are not getting all of the capital they need or are not getting it at all.”
She suggested that small business owners start with the SBA's local resource partners or district offices, who can connect them with local lenders, and also use the SBA's online Lender Match tool.
One finding where small businesses agree with a broader macroeconomic view is the general state of the economy. Over a quarter (27%) describe the economy as “excellent or good,” and that trend hasn't worsened, even as inflation fears have risen again. It's also significantly higher than last year's quarterly survey (21%). Economic performance helps explain why nearly three times as many business owners cite inflation as the biggest risk to them (37%), compared to the second biggest threat, consumer demand (13%).
SBA Administrator Guzman called the 17.2 million new business applications filed during the Biden administration a sign of economic optimism despite inflation. She pointed to Biden legislation boosting government spending on infrastructure and clean energy that spur economic growth. “These are all small business deals with these opportunities,” she said. “That's the economic growth that the president has been focused on.”
However, economists increasingly see the spending plans linked to fiscal policy and the increase in national debt as the cause of persistent inflation.
The CNBC|SurveyMonkey Small Business Confidence Index remained unchanged from the previous quarter, at 47 out of 100, up one point from the second quarter of last year.
The CNBC|SurveyMonkey data is consistent with other recent small business survey results. In Goldman Sachs' “10,000 Small Businesses Voices” survey released this week, 71% of small business owners said inflationary pressures on their businesses had increased in the past three months, and 49% said they had had to raise prices. In the CNBC survey, 48% said they would raise prices.
Inflation will have a major impact on how small business owners in America position themselves in the presidential election.
Inflation is the most important issue for small business owners to vote on, with 63 percent of survey respondents saying so, followed by economic growth at 61 percent.
Confidence in President Biden's leadership of the presidency – which is typically low among a more conservative target group of small businesses – remains below the new poll at 31%, down two percentage points from the previous quarter. Among Republican small business owners who participated in the survey, 5% are satisfied with Biden's job. Among Democrats, 82% of small business owners approve of Biden, although pollsters say approval ratings below 90% are a sign of dissatisfaction within their own party.
Biden made some gains among his supporters: The overall Small Business Confidence Index (SBI) score in this survey subgroup remained unchanged from the previous quarter at 61, up from 55 in the third quarter of 2023.
The CNBC poll found that there is one area of rare consensus among small business owners who identify as either Republican or Democrat: Both say they feel disadvantaged in government policies compared to large corporations.
The Goldman Sachs survey found that 55% of business owners are dissatisfied with how much attention the candidates are paying to small business issues, with inflation being the most frequently cited issue at 73%.
Guzman said the SBA has doubled the number of small loans, including loans to startups and to women and people of color, who she said receive the highest interest rates for starting a business. She also said a larger share of the government's lending volume is going to “rural banking deserts.”
And the total amount of government contracts going to small businesses has reached 28 percent, Guzman said, or about $178 billion, according to the latest government accounting. “We want more people to do business with the world's largest buyer,” she said.
Comments are closed.