The fight against inflation was going well for the Federal Reserve and economy for much of last year and into 2024, but one important demographic remained unconvinced about the progress being made in lowering pricing: small business owners.
Now, more influential parties are coming around to a view that small businesses have been stubborn in saying is closer to the on-the-ground truth: inflation isn’t coming down fast enough. On Wednesday, Federal Reserve Chair Jerome Powell conceded that after three months of disappointing data on inflation, there has been a “lack of further progress” this year. Market traders, who not long ago were in interest rate cut euphoria mode and forecasting up to six rate cuts by the Fed this year, are now more likely to see one or two cuts at most.
Disappointment over inflation is nothing new for small business owners, and their frustration over high prices is increasing again, according to the WHNY News|SurveyMonkey Small Business Survey for Q2 2024.
One in four (24%) small business owners tell WHNY News that they think inflation has reached a peak, down from 29% in the previous quarter, and back to where the economic sentiment reading was a year ago. The percentage of small business owners who expect inflation to rise from here is trending up as well — 75% this quarter, up from 69% in Q1.
“Small business owners are the engine of our economy, and the data shows they are still pessimistic about overcoming inflation,” Lara Belonogoff, senior director of brand management and research at SurveyMonkey, said in a statement upon the Q2 survey’s release.
This WHNY News|SurveyMonkey online poll was conducted April 8-12, 2024 among a national sample of 2,130 self-identified small business owners ages 18 and up.
Despite a positive market reaction to Fed Chair Powell’s comments after the FOMC meeting on Wednesday — in the least, Powell all but ruled out another rate hike this year — small business confidence in the Fed has declined. Last quarter, a little over one-third (35%) of business owners said they had confidence in the Fed. That’s not fallen back to 31%, where it was in Q2 of last year.
“Inflation remains a top concern, clearly, for small businesses,” said U.S. Small Business Administration head Isabel Casillas Guzman in an interview with WHNY News’s Kate Rogers at the virtual Small Business Playbook event on Thursday. “We’ve tried to make sure the SBA is more readily available to credit worthy borrowers out there. Half of businesses don’t get the capital they need fully, or at all.”
She suggested small business owners start with local SBA resource partners, local district offices, which can connect them with lenders on the ground, as well as starting with the SBA’s online Lender Match tool.
One finding over which small businesses are in line with a broader macro view is the overall state of the economy. Over one-quarter (27%) describe the economy as “excellent or good,” which has not trended lower even as inflation fears have picked back up. It’s also notably up from 21% in the year-ago quarterly survey. The economy’s performance helps explain why nearly three times as many business owners cite inflation as the biggest risk they face (37%) compared to the No. 2 threat, consumer demand, at 13%.
SBA Administrator Guzman cited the 17.2 million new business applications filed during the Biden administration as a sign of the economic optimism despite inflation. She pointed to the Biden legislation that is spurring government spending on infrastructure and clean energy, which are economic growth drivers. “These are all small business trades across those opportunities,” she said. “That’s the economic growth the president has been focused on.”
Increasingly, though, it’s also a fiscal policy-linked spending plan and rise in federal debt that economists are tying to sticky inflation.
The WHNY News|SurveyMonkey Small Business Confidence Index was unmoved quarter-over-quarter, at 47 out of 100, and up one point from Q2 of last year.
The WHNY News|SurveyMonkey data is consistent with other recent small business survey findings. Goldman Sachs’Â 10,000 Small Businesses Voices survey released this week cited 71% of small business owners saying inflationary pressures have increased on their businesses over the past three months and 49% saying they’ve had to raise the prices. In the WHNY News survey, 48% said they are raising prices.
Inflation will loom large in how America’s small business owners tilt in the presidential election.
Inflation is the No. 1 issue over which small business owners say they will vote, with 63% of survey respondents citing it, followed by economic growth at 61%.
Confidence in President Biden’s handling of the presidency — which is typically low in a small business demographic that skews conservative — remains underwater in the new survey, at 31%, down by two percentage points quarter over quarter. Among Republican small business owners taking the survey, 5% approve of the job Biden is doing. Among Democrats, 82% of small businesses approve of Biden, though pollsters say that approval ratings under 90% within one’s own party are a signal of dissatisfaction.
Biden has made some gains with his supporters, with the overall Small Business Confidence Index reading among this survey subset unchanged quarter over quarter at 61, and up from 55 in Q3 of 2023.
The WHNY News survey found that in one area, small business owners who identify as either Republicans or Democrats do reach a rare point of consensus: both say that when it comes to government policy, they are getting slighted compared to large corporations.
The Goldman Sachs survey found that 55% of business owners are unhappy with the amount of focus small business issues get from candidates. Inflation, at 73%, was the issue cited most frequently.
Guzman said that the SBA has doubled the number of small-dollar loans, including to startups, as well as to women and people of color, who she noted are starting businesses at the highest rates. She also said more of the government loan volume is going into “rural banking deserts.”
And the total amount of government contracts going to small businesses has reached 28%, Guzman said, roughly $178 billion, according to the recent government scorecard. “We want more people to do business with the largest buyer in the world,” she said.Â
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