U.S. Chamber: Inflation Eases, But Small Businesses Still Struggling

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WASHINGTON, D.C. — The MetLife and U.S. Chamber of Commerce Small Business Index, released today, shows that small business owners continue to face tough economic conditions amid high inflation and rising interest rates but are increasingly hopeful for the future.

The overall Index score rose in the second quarter to 63.1 from 60 as a record high share of small business owners (71 percent) expect their revenue to increase in the next year. A record high share also anticipates hiring more staff in the next year (47 percent up from 37 percent last quarter). These are the most optimistic readings for both measures since the Index began in 2017.

“The challenges of our current economy may have delayed some small business owners’ plans to expand or hire more staff, but now they see opportunity for growth on the horizon,” said Tom Sullivan, Vice President of Small Business Policy at the U.S. Chamber of Commerce. “Small businesses are again showing remarkable resiliency. There has been a strong majority reporting that their business is in good health over the last year and it’s clear many have high expectations for the future.”

Small Businesses Adjust to Higher Interest Rates, Tighter Credit  

While interest rate hikes have implications for the broader economy, nine in 10 (91 percent) respondents say small businesses are the most vulnerable to rising interest rates (52 percent strongly agree with this).

More than three-quarters (76 percent) say that rising interest rates are limiting their ability to raise capital, up from 66 percent who said the same last quarter. A similar percentage (73 percent) say it’s harder to borrow money because banks are tightening lines of credit.

Small businesses are also turning to more sources for capital compared to a year ago, particularly personal savings, friends, and family.

Half (50 percent) of small businesses report that they have delayed plans to grow their business in response to higher interest rates. A similar number (49 percent) indicate they have taken out a loan within the past year to cover higher costs due to inflation.

This is the sixth consecutive quarter where inflation tops the list of challenges for small business owners. More than half (54 percent) say inflation is a top challenge followed by interest rates rising (23 percent), supply chain issues (23 percent) and revenue (20 percent).

“The percentages of small business owners expecting an increase in revenues and hiring this quarter represent record highs in the six-year history of the Index, which is a very promising sign,” says Cynthia Smith, senior vice president, Regional Business at MetLife. “While the current economic conditions may have stalled their plans to grow, the combination of small business owners’ determination, drive and positive outlook bodes well for the future.”

The MetLife and U.S. Chamber of Commerce Small Business Index is part of a multiyear collaboration by MetLife and the U.S. Chamber to elevate the voice of America’s small business owners and highlight the important role they play in the nation’s economy. The quarterly Index, an online survey of approximately 750 small business owners and decision makers, is designed to take the temperature of the sector, see where small business owners are confident, and where they are experiencing challenges.

The Q2 2023 survey was conducted May 8-24, 2023. The survey has a credibility interval of plus or minus 4.4 percentage points for all respondents.