The share of US small businesses raising prices last month fell to the lowest level in more than two years, potentially providing another disinflationary force in the economy.
(Bloomberg) — The share of US small businesses raising prices last month fell to the lowest level in more than two years, potentially providing another disinflationary force in the economy.
A net 29% reported higher selling prices in June compared to three months earlier, the smallest share since March 2021, the National Federation of Independent Business said in a report Tuesday.
And while inflation was still cited as firms’ most important problem, it’s nowhere near as acute as it was a year ago.
Consumer-price growth has eased dramatically since peaking last June, and figures due Wednesday are expected to show the trend continued last month.
However, underlying price pressures are still rising at an uncomfortable pace, which will likely lead the Federal Reserve to resume raising interest rates in two weeks.
The drop in the percentage of owners raising prices may also prove temporary.
Some 31% of small businesses said they plan to charge more of their customers in the next three months, the highest since November.
Inflation has long weighed on businesses’ outlook and earnings, but it’s improving somewhat.
Four in 10 owners in June expected worse business conditions in six months, down from half in May and the lowest reading since February 2022.
A smaller share also expected lower earnings in the next three months, helping to boost NFIB’s overall optimism index to the highest level this year.
The reading, which registered at 91, matched the highest estimate in a Bloomberg survey of economists, but is still significantly lower than its pre-pandemic trend.
Fewer small businesses expect credit conditions to worsen, also helping to boost optimism but still near the worst reading in a decade.
“Halfway through the year, small business owners remain very pessimistic about future business conditions and their sales prospects” NFIB Chief Economist Bill Dunkelberg said in a statement.
Along with inflation, respondents also pointed to quality of labor as a top issue.
The percent of owners reporting job openings that were hard to fill also decreased slightly from May, though the figure remains historically high.
–With assistance from Chris Middleton.
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