Economic Update: Small Businesses

Economic Update: Small Businesses

Small businesses are on the front lines of the U.S. economy, and monitoring trends in this important arena can therefore help shed light on the momentum of the current expansion.

Unfortunately, though, recent datapoints have been discouraging. Indeed, small business owner confidence weakened for the third month in a row in March, according to the latest report from the National Federation of Independent Business (NFIB).

Under the hood only two components that make up the headline sentiment gauge improved in March, three were unchanged, and five deteriorated. The bulk of the weakness was concentrated in surveyed owners’ general outlook for the economy and forward sales expectations. With respect to the latter, the gloomier sales forecasts have to do in part with “real” sales, i.e. inflation-adjusted. This is not too surprising as both consumers and businesses are now feeling the pinch from rising prices, and for owners this means declining profit margins unless measures such as cost-cutting and/or price hikes are explored.

For most of the post-pandemic recovery and subsequent economic expansion raising selling prices has been the go-to move as consumers have shown little to no hesitation when it came to purchasing what they want, thanks to a combination of rising wages and stronger household balance sheets. Above-average tax refunds have provided another spending tailwind this year but this is likely only a fleeting boost and consumers’ ability to shake off historic price increases will eventually diminish and the normalization in broader consumption trends will as a result accelerate. Small business owners are well aware of all these current and looming developments, and roughly a third of NFIB survey respondents now see inflation as the greatest problem their company faces at the moment, the highest reading since 1981.

In a response to this environment, a record 72 percent of owners said that they raised selling prices recently, and half anticipate that additional hikes will be needed in the months ahead. The largest share of firms reporting price increases were in the wholesale, construction, agriculture, and retail industries. As mentioned earlier, another way to respond to rising input costs is to cut spending elsewhere, and for many companies this means halting any payroll expansion plans. In fact, total employment changes were actually negative last month on net, and reported hiring plans have fallen considerably, albeit from historically high levels. Total job openings have also retreated a bit but overall remain extremely elevated, and with reported wage increases last month being only fractionally below the all-time high it suggests that for now employment bargaining power remains firmly on the side of labor.

What To Watch This Week


  • Chicago Fed National Activity Index 8:30 AM ET
  • Dallas Fed Manufacturing Survey 10:30 AM ET


  • Durable Goods Orders 8:30 AM ET
  • Case-Shiller Home Price Index 9:00 AM ET
  • FHFA House Price Index 9:00 AM ET
  • Consumer Confidence 10:00 AM ET
  • New Home Sales 10:00 AM ET
  • Richmond Fed Manufacturing Index 10:00 AM ET
  • 2-Yr Note Auction 1:00 PM ET


  • MBA Mortgage Applications 7:00 AM ET
  • Pending Home Sales Index 10:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • Survey of Business Uncertainty 11:00 AM ET
  • 2-Yr FRN Note Auction 11:30 AM ET
  • 5-Yr Note Auction 1:00 PM ET


  • GDP 8:30 AM ET
  • Jobless Claims 8:30 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • Kansas City Fed Manufacturing Index 11:00 AM ET
  • 7-Yr Note Auction 1:00 PM ET
  • Fed Balance Sheet 4:30 PM ET


  • 5-Yr TIPS Settlement
  • Personal Income and Outlays 8:30 AM ET
  • Employment Cost Index 8:30 AM ET
  • Chicago PMI 9:45 AM ET
  • Consumer Sentiment 10:00 AM ET
  • Baker Hughes Rig Count 1:00 PM ET
  • Farm Prices 3:00 PM ET

Related Articles

Subscribe to the Slavic401k Blog

Be the first to know when new content is available.


Language / Accessibility Tools