President Joe Biden greets workers during a visit to WS Jenks & Son hardware store in Washington, DC, the United States, on Tuesday, March 9, 2021.
Yuri Gripas | Bloomberg | Getty Images
Small business confidence has barely increased as fears of inflation, hiring costs, tax hikes and partisan policies weigh on Main Street as there are signs of a return to pre-pandemic levels.
According to a survey conducted by CNBC |. Last month SurveyMonkey Small Business, 64% of business owners say their business can survive for more than a year in current terms and conditions as the wave of closings and bankruptcies that struck many businesses on Main Street wears off and the country emerges from Covid – 19th That is an increase of 55% in the first quarter. The survey also found that 34% of business owners think the current terms and conditions are good.
The survey’s Small Business Confidence Index rose from a record low of 43 in the first quarter to 45 in the current quarter. However, this is still a negative sentiment reading.
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“In the middle, confidence is appropriate as there are still many unknowns about recovery,” said Karen Kerrigan, president of the Small Business & Entrepreneurship Council. “Many are still digging … paying back the rent and getting back to normal sales.”
The percentage of business owners who forecast sales will decline in the next year decreased from 27% in the last quarter to 18%. Less than half (46%) expect sales growth.
Biden’s Infrastructure Plan and Main Street
The US economy is recovering strongly as multiple rounds of business reviews have given consumers a boost. President Joe Biden’s infrastructure plan and spending priorities should also boost the economy. But views on the president’s ambitions are mixed on Main Street.
While just over half of small business owners support Biden’s infrastructure legislation, there is a divide on Main Street based on party affiliation. According to the survey, 97% of small business owners who identify as Democrats and Democrats support the American employment plan. That drops to 55% for Independents and 23% for Republicans and GOP Leans.
The tax policy needed to fund the infrastructure plan divides small business owners, with 39% of business owners in favor of paying for the measures by increasing the corporate tax rate from 21% to 28%, while 59% are against. The partisan division is also wide: 85% of Democrats and Democrats are in favor of a corporate tax hike, only 38% of Independents and only 13% of Republicans and GOP supporters
“We view this as a fragile recovery, and these proposals certainly bring a little more uncertainty,” said Kevin Kuhlman, vice president of federal government relations for the National Federation of Independent Business. The latest NFIB survey found that small business confidence has returned to historical averages after being below that level for almost a year.
Certain industries in the small business community should benefit from infrastructure spending such as construction and internet services. However, Biden’s alignment with the unions could dampen small business owners’ expectations of the potential benefits of the plan.
“Most companies are not union companies,” Kerrigan said, although she added that most are positive about infrastructure spending.
Fear of inflation, attitude
As companies try to get back to normal, finding workers and supply chain issues are still headwinds when working at full capacity.
A quarter of small businesses expect their headcount to increase next year from 19% last quarter. However, 24% have vacancies that have not been filled for at least three months, up from 16% in Q1 2020 (the last time the survey asked entrepreneurs on this question).
The economic recovery can be seen in the hardest hit accommodation and catering services sector, where 34% of companies have vacancies and 31% expect to hire more people in the next year. More than half of business owners in this space expect sales to increase over the next 12 months, while only 13% expect a further decrease.
But Main Street is also concerned about the rise in commodity prices as the government pushes for higher corporate taxes and a higher minimum wage. Just under half (48%) of small business owners said that raw material costs will increase the most in the next six months (compared to labor costs and capital costs).
“These are real things that make a difference in business and operations,” said Kerrigan. Global supply chain problems – which have hit businesses of all sizes – and the battle to find new suppliers, coupled with inflation, have limited the small business sector’s ability to return to pre-pandemic confidence levels.
“They feel squeezed because they can’t raise prices and all the talk about inflationary potential is affecting confidence and the size of their investments,” she added.
The impact of personal politics on small business sentiment is evident in survey responses on immigration.
The shift in management has resulted in a secular shift in the attitudes of small Republican business owners towards tax, regulatory and immigration policies, which are key factors in dampening the Small Business Confidence Index. Republican confidence rose from 32 to 35, but that number was 57 in the quarter leading up to the 2020 election.
Meanwhile, 41% of small business owners expect changes in immigration policy to adversely affect their businesses in the next 12 months, up from 36% in the first quarter and 17% a year ago. Overall, 17% of property owners said immigration is the issue that is most important to them right now, up from 5% who said so in the first quarter. That spike led immigration to adopt health policy in the second quarter poll, seen as the single most important problem on Main Street behind jobs and the economy. Over a quarter of Republicans, 27%, consider immigration to be the most important factor, versus 9% of Independents and 3% of Democrats.
The current crisis on the country’s southern border and the increase in migrants have posed a management challenge, but small business experts say partisan policies are the likely explanation for this shift.
In fact, Kerrigan noted that for the past two decades, small businesses have generally implemented immigration reform and that the Trump administration’s immigration policy has been a net negative for Main Street. Kerrigan said small business owners may also be disappointed that Biden has yet to take further action to fix a broken immigration system that is making it difficult to get a work visa.
CNBC’s online poll | SurveyMonkey was conducted April 19-26, 2021 using the SurveyMonkey platform among a national sample of 2,201 self-identified small business owners aged 18 and over. For the quarter, the study also included results from 9,225 people who don’t own small businesses.