Small Businesses are Hiking Prices

The business of America is small business: companies of 500 workers or fewer employ more than three-quarters of our nation’s workforce.  One quarter of American workers receive paychecks from companies with fewer than 20 employees. Small business owners are on the front line of the American economy. Their individual decisions collectively lead economic trends.

That’s why the National Federation of Independent Business’s (NFIB) monthly survey is important. The small business advocacy group conducts a monthly survey of its 325,000 members to gauge levels of confidence, access to credit, business trends and capital spending plans. The survey offers ground-level perspectives on a real-time basis. Because small businesses dominate America’s commercial landscape, strategies developed in creaky office chairs across the country can, when amassed, often supersede those made in executive suites.

Pricing plans (the percentage of survey respondents who plan price increases) have been a useful inflation indicator that tends to lead price increases by at least six months. While the share of members who plan to raise prices downshifted slightly last month from 16 per cent to 14 per cent, the trend is decidedly positive. As recently as last June, only 1 per cent planned to charge more. The current share of price increases suggests that year-over-year CPI will trend toward 4 per cent over the next six months, which is a substantial increase from the 2.4 per cent gain posted through March. If that happens, expect interest rates to follow.

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