Inflation continues to be a major concern for small businesses, as indicated by a recent survey that showed a decline in optimism among small business owners in February. The National Federation of Independent Businesses' Optimism Index dropped to 89.4 last month, remaining below the 50-year average of 98 for the 26th consecutive month.
According to the survey, 23% of small business owners identified inflation as their top problem, a three-point increase from January when labor quality was the primary concern. Inflation levels have remained high, with prices increasing by 0.4% from January to February, up from the previous month's 0.3% rate, as reported by the Labor Department.
Consumer prices rose by 3.2% last month compared to a year earlier, slightly higher than the rate in January. Core prices, which exclude food and energy costs, also saw a 0.4% increase from January to February, surpassing the target needed to bring inflation down to the Federal Reserve's 2% goal. Core inflation is closely monitored to gauge the future direction of inflation.
Amidst the challenges posed by inflation, small business owners are cutting back on spending. The survey revealed that 54% of owners reported capital outlays in the last six months, a decrease of five percentage points from January. Among those making expenditures, 35% invested in new equipment, 23% acquired vehicles, and 15% made improvements or expansions to their facilities.
