America’s small businesses have been plagued by the sting of persistently high inflation, with experts predicting little relief from high prices in the near term in an increasingly fraught economic climate with recession and stagflation fears on the rise.
According to a new report from the U.S Chamber of Commerce (pdf), nearly 9 in 10 small business owners (88 percent) were worried about the impact of inflation in the second quarter, a problem that has risen to the top of their list of business concerns.
That’s up from 85 percent in the first quarter and 75 percent in the last quarter of 2021, of those who said they’re worried about rising prices.
Nearly half (49 percent) said they were very concerned about inflation, which is up from 44 percent in the first quarter and 31 percent in the fourth quarter of last year.
Also rising was the share of small business owners who said that inflation has had a significant impact on their operations. That’s up from 74 percent in the first quarter to 80 percent in the second quarter, the report said.
‘Plagued by Rising Prices’
The Chamber of Commerce report dovetails with recent data from the National Federation of Independent Business (NFIB).
“With inflation reaching a near 40-year high, small businesses continue to be plagued by rising prices with little hope for relief on the horizon,” NFIB Vice President of Federal Government Relations Kevin Kuhlman said in a statement. “As recent data shows, inflation remains the top problem for one-third of small business owners, has a direct impact on small business optimism, which is at a near 50-year low, and continues to harm the small business recovery.”
Kuhlman cited data showing that 62 percent of small employers said inflation was having a major impact on their business.
Separately, a recent survey from the small business network Alignable said more than a third of U.S. small businesses were unable to cover rent in June, with most blaming inflation.
‘Things Will Get Much Worse Before They Get Better’
Even though the prevailing narrative has shifted somewhat from inflation to the potential for a recessionary downturn, experts say price pressures are likely to stick around for longer in a dismal spell of stagflation.
Darius Dale, founder and CEO of 42 Macro, said in a post on Twitter that his firm’s econometric models predict “sticky” inflation over the next two to three quarters. Dale shared a chart projecting that the year-over-year pace of inflation, as reflected by Consumer Price Index (CPI) would stay above 8 percent until December of this year and above 7 percent until March 2023.
In a similar but slightly more optimistic vein, Jim Bianco, president of Bianco Research LLC, said in a series of posts on Twitter that the annual pace of CPI inflation could “persist well into the NFL regular season” at a level above 8 percent. The regular season runs into January of 2023.
Government data show that CPI rose at a multi-decade high of 8.6 percent in May, with the Cleveland Federal Reserve inflation “nowcast,” which provides a real-time inflation estimate, projecting prices will have accelerated at an even faster pace of 8.7 percent in June when the official data is released later this month.
Renowned economist Nouriel Roubini said in a recent op-ed in The Guardian that the debate about persistent vs. transitory inflation has now been largely settled.
“’Team Persistent’ won, and ‘Team Transitory’—which previously included most central banks and fiscal authorities—must admit to having been mistaken,” he argued.
Roubini expects what he calls a “stagflationary debt crisis,” as persistently high inflation forces central banks to keep monetary settings tight despite signs of a rolling over economy, “thereby increasing the probability of a synchronized global recession.”
“But because the next recession will be stagflationary and accompanied by a financial crisis, the crash in equity markets could be closer to 50 percent,” he wrote.
“Things will get much worse before they get better,” he argued.
From The Epoch Times