Inflation: US small businesses send deflationary signal - financial expert analyzes

Inflation: US small businesses send deflationary signal - financial expert analyzes

According to a report by finanzmarktwelt.de, inflation in the USA is declining. The US Federal Reserve began raising interest rates last year to curb inflation. As a result of these measures, inflation fell from 9.1% in June 2022 to 4.0% in May 2023. For the month of June, only a price increase of 3.1% is expected compared to the same month last year. A new report from the National Federation of Independent Business (NFIB) shows that more US small businesses are foregoing further price increases. This could be interpreted as a possible deflationary signal.

A recent report from Bloomberg confirms that the share of U.S. small businesses that raised prices last month fell to its lowest level in more than two years. In June, only 29% of companies surveyed reported higher sales prices compared to three months earlier. This is the lowest share since March 2021. Although inflation is still cited as a top concern for companies, it is nowhere near as acute as it was a year ago.

Despite the decline in price increases, around 31% of small businesses plan to charge higher prices to their customers in the next three months. This is the highest value since November. Inflation has long weighed on companies' prospects and earnings, but there are signs of improvement. In June, only 40% of entrepreneurs expected the business situation to worsen in the next six months. This is down from 50% in May and the lowest since February 2022.

Nevertheless, small business owners are still pessimistic about the future business situation and their sales prospects. Some of the optimism is supported by the improving earnings outlook and reduced expectations of deterioration in credit conditions. However, the overall optimism index is still well below the pre-pandemic trend.

Inflation is not the only problem raised by the companies surveyed