Scholars and political strategists have long observed a tendency among voters to seek leadership change during times of economic distress. This phenomenon stems from the belief that new leadership could provide solutions to pressing economic challenges. Our recent quarterly surveys have highlighted small business owners' concerns about inflation and other difficulties during the Biden administration.
Post-election optimism is increasing in the small business community.
In the CNBC|SurveyMonkey Small Business Survey for the fourth quarter of 2024, the small business trust index rose to 62 out of 100, up 11 points from the third quarter of 2024 (at 51) and 16 points higher than the fourth quarter of last year (at 46) .
Optimism among Republican business owners is driving the rise in positive sentiment. In particular, small business owners who identify as Democrats reported a decline in business sentiment, from 62 in the previous quarter to 50 in the fourth quarter. However, that decline isn't enough to offset the massive jump in sentiment among Republican business owners – 28 points quarter-over-quarter. The Independents saw a small increase from 51 points in the third quarter to 57 points in the fourth quarter.
The online survey was conducted November 11-11. 18 among a sample of over 2,700 small business owners.
Trump tariffs and partisan sentiment
While small business sentiment improved, owners expressed concern about the unknown when it comes to increased trade restrictions and the possibility of higher costs for imported goods and materials under a new upcoming presidency.
When it comes to tariffs, concerns are almost half shared. More than half (54%) of small businesses overall are “not at all worried” or “not too worried,” while 46% are “very or somewhat worried.”
When breaking the data down by political affiliation, 76% of Republican business owners show little to no concern about the proposed tariffs, compared to 22% of Democrats. Conversely, 78% of Democratic business owners are “very or somewhat concerned,” compared to just 24% of Republican business owners.
The tariff issue continues to be divided along party lines. Four in ten (42%) small business owners expect President-elect Trump's proposed tariffs will impact their business, compared to 33% who expect no impact. Republican business owners are more likely than Democrats to believe tariffs will have no impact on them (48% vs. 16%). Two in three (64%) Democrats believe tariffs will impact their business, compared to just 31% of Republicans.
Interestingly, only one in four (23%) small business owners are taking preventive action in advance of proposed tariffs, with more than half not expecting it (56%) and one in five unsure (20%).
Agreement on an inflation ceiling
The survey results reflect encouraging sentiment on inflation and a less partisan outlook. 40 percent of small business owners believe inflation has peaked, up from 33 percent in the previous quarter – including 45 percent of Republican and 40 percent of Democratic respondents. While inflation remains the top concern for small business owners, only 28% cite inflation as their top risk, compared to 38% in the previous quarter.
Confidence in the Federal Reserve's ability to control inflation hit a new high in this quarter's report, but the Fed remains an issue where partisan divides are significant. Nearly half (45%) of small business owners are “very or somewhat confident” in the Fed’s ability to control inflation, an increase of 11 percentage points from the previous quarter (34%). But 68% of Democratic respondents are included in this average, compared to 31% of Republican respondents.
As the results of the latest CNBC|SurveyMonkey study reflect an increase in confidence and optimism, the question is whether this trend will continue in the long term. It remains to be seen how the new economic policies will actually impact these entrepreneurs and their businesses as a new government takes shape.
– By Eric Johnson, CEO, SurveyMonkey
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