
Small Business Snapshot
Yesterday, the National Federation of Independent Business (NFIB) released its monthly report on small business sentiment as of January 2022.
Here’s our Executive Summary:
Supply Chain
- 90% of small business owners report supply chain disruptions on their business, with 36% reporting a significant impact
- 18% reported increases in inventory while 15% reported stock reductions
- A net 3% of owners plan inventory investment in the coming months, down from 8% in from December, reflecting successful inventory building efforts
Inflation
- 22% of owners state that inflation remains their #1 business problem, the highest since 1981
- 61% of owners are raising average selling prices, the highest since 1974
Labor Market
- 11% of owners state that labor costs as their #1 business problem
- 47% of owners reported job openings that could not be filled
- 50% reported raising compensation, the highest since 1974
Outlook
- “Small business owners remain pessimistic about economic conditions over the next 6 months”
- Consumer sentiment notably more optimistic than small business owner sentiment (see chart, courtesy of Advisor Perspectives)
Here’s our take:
- We believe supply chain disruptions are a significant driver of inflation, but that the threat they pose small business financial health will dissipate over 2022
- As such, we expect inflationary pressures to ease over time, which will help labor market imbalances to ease over time
- Volatility will be a meaningful factor in 2022 as the economy assesses the impact of higher interest rates against an expanding economy that continues to recover from the shutdown of 2022