Small businesses are flashing warning signs on the U.S. economy as inflation, supply-chain snarls, a shortage of workers and rising interest rates darken the outlook for entrepreneurs.
Fifty-seven percent of small-business owners expect economic conditions in the U.S. to worsen in the next year, up from 42% in April and equal to the all-time low recorded in April 2020, according to a survey of more than 600 small businesses conducted in May for The Wall Street Journal by Vistage Worldwide Inc., a business-coaching and peer-advisory firm.
The measure is one part of a broader confidence index that in May posted its largest year-over-year drop since the Covid-related shutdowns of April and May 2020. Despite rising prices, the portion of small businesses that expects revenue to increase in the coming year fell to 61%, down from 79% in May 2020.
“It just feels like there are all of these factors that are out of our control, and it doesn’t seem like there is a light at the end of the tunnel,” said
Minnie Luong,
owner of Chi Kitchen, a manufacturer of kimchi and other fermented Asian-flavored vegetables.
The Pawtucket, R.I., company, which has eight employees, has faced a roughly 50% increase in raw-materials costs and shortages of glass jars used in packaging. Ms. Luong raised prices for wholesale retail accounts by 5% in May. It was the company’s first increase for those customers in its seven-year history, but not enough to cover rising ingredient costs.
Sales have slowed in recent weeks, said Ms. Luong, who isn’t sure if the May price increase, seasonality or a pullback in spending is to blame. “I don’t know what it is, but I don’t like it,” she said.
Small businesses are often the first to feel the effects of an economic downturn. Reports of diminishing optimism are coming from a variety of sectors, from manufacturing to consumer products and services.
“Customers that would typically buy a truckload are buying half a truckload,” said
Drew Bahner,
chief executive of Expanded Solutions, an Oklahoma City-based manufacturer of expanded metal products used for industrial applications, fencing and other security needs, and patio furniture. “We are not losing business. They are not seeing the business.”
Large companies also are feeling the strain of supply-chain problems, rising prices and labor shortages.
Walmart Inc.,
WMT 0.11%
the country’s largest retailer by revenue, said sales increased in the most recent quarter, but higher product, supply-chain and employee costs ate into profits.
Target Corp.
TGT 1.26%
posted lower quarterly earnings last week as supply-chain costs and inflationary pressures ate into profits. Those chains are also seeing signs that consumers are beginning to curtail spending, particularly on discretionary purchases, as they deal with higher prices for fuel and other expenses.
Small businesses tend to have smaller cash cushions than big companies, making it tougher to weather economic storms. Many entrepreneurs say they have been worn down by more than two years of managing Covid-19 and a variety of economic challenges. Government-aid programs, which helped offset the economic pain, have largely run dry.
Source: techiai.com | By Jessica