Record share of U.S. small businesses drives up prices amid inflation

A record share of small U.S. businesses raised prices in January to combat high material and labor costs.

A net 61% of owners reported an increase in average selling prices last month, the highest in monthly data dating back to 1986, the National Federation of Independent Businesses said on Tuesday February 8. Inflation remains a top concern for small businesses, consistently cited by the largest share of respondents since 1981.

“More small business owners have started the new year by raising prices in a bid to pass on rising inventory, supplies and labor costs,” said the NFIB’s chief economist, Bill Dunkelberg, in a statement. “Owners are also increasing compensation at record rates to attract qualified employees to their vacant positions.”

In another sign of inflationary pressures, a record 50% of companies said they had raised pay despite struggling to attract skilled talent.

The NFIB optimism index fell to 97.1 from 98.9, the lowest since February 2021, the group said on Tuesday. The median estimate from a Bloomberg survey of economists called for a decline to 97.5.

Seven of the 10 components of the optimism index declined in January as COVID-19 cases hit record highs. The net share of owners expecting higher sales over the next three months fell to minus 3%, the lowest since July. Just 9% said now was a good time to expand, the smallest share since February last year.

Inventory accumulation plans fell to an 11-month low. Additionally, the net share that reported higher inventories in the past three months hit its highest level since 2000. Inventories accounted for most of the growth in the U.S. economy in the fourth quarter.