Inflation’s shock to economy complete as small business tipping point reached

The latest Consumer Price Index reading, the highest in four decades, isn’t the only sign that inflation is extending rather than giving up its hold over the U.S. economy in 2022. An increasing number of American small businesses say they are now passing on higher costs to customers, or soon will be forced to make that decision.

While the 74% of small business owners who say they are experiencing rising costs of supplies is virtually unchanged from Q4 2021, according to a new CNBC/SurveyMonkey Small Business Survey, the number of businesses passing on costs to customers has risen to 47% in the first quarter, up from 39% in Q4 2021. And another 32% indicate they will have to raise prices soon if inflation persists. Sticky inflation is their expectation. Over eighty percent of small business owners expect inflation to still be a problem six months from now (55% say that is “very likely”), according to the CNBC|SurveyMonkey data.

The Main Street concerns about inflation are connected to the small business outlook on the supply chain, with 75% saying these issues are likely to be a problem six months from now. And there is a lack of faith in policymakers, with 71% of small business owners not confident in the Federal Reserve’s ability to control inflation.

The CNBC/SurveyMonkey online poll was conducted January 24-30, 2022 among a national sample of 2,227 self-identified small business owners.

“The underlying problem with inflation is that there’s no end in sight,” said Laura Wronski, senior manager of research science at Momentive, which conducts the survey for CNBC. “We’ve become accustomed to rising and falling Covid waves, and businesses have had the time to rewrite their playbooks to accommodate. But no one knows how quickly or to what degree inflation will continue to rise, so that unpredictability is inducing some unease,” she said, with the lack of faith in the Fed adding to the uncertainty.

“I don’t think it is getting better. It has gotten worse,” said Michelle Pusateri, owner of San Francisco-based Nana Joes Granola.