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Inflation Becoming a Bigger Concern Than COVID-19

While small businesses are still being financially affected by the pandemic, the focus has shifted onto inflation.

August 16, 2022

 In a recent report by online small business network Alignable, more than half of the surveyed small businesses said that COVID-19 was still affecting them financially in the third quarter, with 23% claiming that the impact remains severe. At 56%, the small businesses reporting COVID-19 as problematic remained relatively unchanged from the previous quarter. Only 25% claimed to be fully financially recovered.

However, despite the lingering effects of the pandemic, Alignable reported that small businesses have significantly shifted their financial focus from COVID-19 over to inflation. Related fears include losing customers as well as not having enough financial resources to stay in business.

Business Survival Amid Inflation

According to the survey, that’s a significant worry for many small businesses in North America. In fact, 47% of small business owners in the United States and 56% in Canada told Alignable that they were concerned that they would have to close their business if the economy didn’t improve in the next few months.

Regionally, more small business owners in Illinois, Colorado, and New York reported being concerned about inflation compared to businesses in other states, including Arizona, Pennsylvania, and Michigan, with a range of 54% to just 27%. In Canada, small business owners worried about inflation fell within the 50% to 59% range across all three of the Canadian provinces surveyed.

Inflation is already starting to take its toll on a few small businesses. In the United States, 1% of businesses reported already being closed because of inflation, and in Canada, the number of closed businesses due to inflation was 2%.

While the White House declared 0% inflation for July, the U.S. Department of Labor’s Bureau of Labor Statistics noted on August 10 that the 0% statistic is due to falling gas prices (7.7%) offsetting the costs of food and electric energy, which continued to rise last month. The all-items index of consumer prices increased 8.5 percent for the 12 months ending in July.

Chain Supply Issues Continue

Small business owners also told Alignable that supply chain issues are currently hurting them the most right now, and they are holding federal leadership five times more responsible for those problems than leaders at state/provincial or local levels.

Heavy concerns notwithstanding, the survey did see an improvement (7%) in the last quarter regarding returning customers, with numbers continuing to move toward pre-pandemic figures. However, it’s still to be seen if that number is sustainable, based on small business owners’ pessimistic outlook for the next 30 days. 

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