WASHINGTON (Reuters) – U.S. small business confidence fell in March, with the share of owners reporting that inflation was their single most important problem the largest since 1981, a survey showed on Tuesday.
The National Federation of Independent Business said its Small Business Optimism Index dropped 2.4 points to 93.2 last month, the third straight month of readings below the 48-year average of 98. The index has declined every month this year.
Thirty-one percent of owners identified inflation as their single most important problem, up 5 points from February. This was the biggest share since the first quarter of 1981 and replaced worries about “labor quality” as the No. 1 problem confronting small businesses.
The economy is experiencing high inflation caused by shortages, massive fiscal stimulus and low interest rates.
Annual inflation is rising at the fastest pace in 40 years. The Federal Reserve last month raised its policy interest rate by 25 basis points, the first hike in more than three years. Minutes of the policy meeting published last Wednesday appeared to set the stage for big rate increases down the road.
According to the NFIB survey, the share of owners raising average selling prices increased 4 points to a record high of 72% last month. It noted that “price-raising activity over the past 12 months has continued to escalate, reaching levels not seen since the early 1980s when prices were rising at double digit rates.” Price increases were across all industries.
Half of business owners planned to raise prices, up 4 points from February. Wage inflation could also pick up.
Forty-seven percent of owners reported job openings they could not fill, down 1 point from February but far above the 48-year historical average of 23%. The share of businesses reporting raising compensation dipped one point to 49%. About 28% planned to raise compensation in the next three months, up 2 points from February.
Twenty-two percent of owners said that labor quality was their top business problem, unchanged from February.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)