Economic confidence retreats from 3-year high among small business owners

Small business owners expressed lower confidence toward the economy in Q4 than in Q3, despite strong holiday sales and cooling inflation

Small business owners expressed lower confidence toward the economy in Q4 than in Q3, despite strong holiday sales and cooling inflation.

Small business owners felt less confident in the economy over the fourth quarter than during the third, despite record-breaking holiday sales and encouraging news concerning the job market, inflation, and interest rates.

According to the Q4 MetLife and U.S. Chamber of Commerce Small Business Index, confidence in the U.S. economy among entrepreneurs dropped to a score of 61.3, eight points down from Q3’s three-year high of 69.2. The shift reflects a return to sentiments held at the start of the year when many analysts believed a recession was on the horizon.

Two of the key factors causing unease among small business owners were rising inflation and staffing struggles. Untamed inflation has remained a top concern for entrepreneurs throughout the year due to worries that rising prices will lead many consumers to stay at home. The September-through-December period reflects the sixth quarter in a row that 50% of small business owners surveyed by the Chamber of Commerce labeled inflation as a major obstacle for their enterprises.

Meanwhile, even as the economy continues to add jobs, smaller companies still face an uphill battle in the competition for talent. Not only is there an ongoing shortage of applicants, but newer generations of workers often come with higher expectations of pay, challenging startups who frequently lack access to capital and are thus unable to afford higher compensation for their staff. In Q4, 48% of small business owners felt that it was more difficult to fill positions than several years ago, while 60% admitted that they struggled to meet employee demands in terms of income.

While small business owners may have felt less confident during the majority of the fourth quarter than they did this summer, most of the reports released in the last few weeks do not reflect recent, notable events concerning the economy. Holiday spending, a vital source of funding for startups, reached all-time highs toward the end of November, with events such as Cyber Monday alone generating $12.4 billion in revenue.

Furthermore, the Federal Reserve announced just this week that it would likely cut interest rates in 2024 due to cooling inflation, further lowering the risks of an economic recession. Given these last-minute shifts, it may be possible that reports of pessimism throughout the September through December period are already out of date. Analyzing sentiments in the first quarter will thus likely provide a more accurate picture of how small business owners currently feel toward the economy.

Did you know? ASBN America’s Small Business Network is now available to stream in over 70 million broadcasting households for users with Roku, Firestick, AppleTV, and mobile Android [download] and Apple IOS [download] devices.