Soaring inflation and snarled supply chains are crushing small businesses owners, who are struggling to maintain their bottom line and retain workers, according to a new survey published by Goldman Sachs.
The survey of owners from Goldman Sachs’ 10,000 Small Business Voices shows that 91% of respondents believe broader economic trends, including red-hot inflation, supply chain issues and a labor shortage, are having a negative effect on their business.
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“Small business owners are stuck between a rock and a hard place as inflation and an uneven economic recovery are impacting every part of our businesses with no end in sight,” said Khari Parker, a member of the Goldman Sachs’ 10,000 Small Businesses Voices National Leadership Council and the owner of a small business, Connie’s Chicken and Waffles, in Baltimore.
The hottest inflation in four decades has exacerbated workplace challenges, according to the survey, with the high costs of attracting and retaining talent hurting small businesses’ profit margins and ability to do business. Eight in 10 respondents said their business’ financial health has been hurt by rising consumer prices over the past six months.
“Small businesses are sending a clear signal that the economy and the challenges they face – like inflation, workforce, supply chain and energy costs – are going from bad to worse,” said Joe Wall, national director of the 10,000 Small Businesses Voices.
A persistent labor shortage has also weighed on small businesses as owners are forced to hike wages in an increasingly competitive market to hire new workers. Some economists have warned that rising wages could fuel even higher inflation. Nearly two-thirds of small business owners said they have increased wages in order to attract new employees or retain their former employees.
As a result of the higher wages, about 60% of small business owners said they are passing along the costs to consumers by raising the prices of goods or services, according to the survey, which is based on 1,107 respondents and was conducted between April 11-14.
The combination of high inflation and rising wages has fueled concern about the possibility of a wage-price spiral, a 1970s-style phenomenon where high inflation leads to pay hikes, which in turn lead to more spending and more expensive prices.
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The inflation spike has been bad news for President Biden, who has seen his approval rating plunge as consumer prices rose. The White House has blamed the price spike on supply chain bottlenecks and other pandemic-induced disruptions in the economy, while Republicans have pinned it on the president’s massive spending agenda.