Small businesses in the United States significantly increased their prices in November, raising concerns over the impending interest rate cuts by the Federal Reserve. According to a recent survey released by the National Federation of Independent Business (NFIB), the net percentage of small business owners raising average selling prices jumped by 13 percentage points to 34%, marking the highest level since March 2023. This surge represents the largest monthly increase in the history of the survey, which began in 1986.
The data revealed that only 8% of small businesses reported lowering their average selling prices, a decrease from 12% in October. Conversely, 39% of businesses indicated they raised prices, an increase from 31% the previous month. The NFIB noted, “Price increases remain well above the monthly average, suggesting continued inflationary pressure.”
Despite an uptick in overall small business optimism for November, inflation continues to be a pressing concern. The survey indicated that 15% of small business owners now cite inflation as their top challenge, up from 12% in the previous month.
Peter Boockvar, chief investment officer at One Point NFG Wealth Partners, emphasized the significance of these findings in light of the upcoming Fed rate cut. He stated that if only this data point were considered, it would warrant an interest rate hike rather than a cut.
The Federal Reserve’s decision to reduce rates is primarily aimed at stabilizing the faltering job market. Estimates from ADP showed that small businesses cut approximately 120,000 jobs in November, a reflection of the ongoing financial pressures they face due to tariffs, high operating costs, and elevated borrowing expenses.
The current climate for small businesses demonstrates a complex dynamic where price increases and inflation concerns contradict the Fed’s strategies. Despite the challenges, the persistent optimism among these businesses hints at resilience and the potential for recovery as economic conditions evolve.