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

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