The outlook of small business owners on the U.S. economy weakened slightly in the first quarter, according to the MetLife and U.S. Chamber of Commerce Small Business Index.
The index dropped slightly this quarter, to 60 from 62.1 the previous quarter. Specifically, it found that 20 percent of small business owners believe the U.S. economy is in good health, down from 27 percent in the previous quarter. Additionally, 29 percent said their local economy was good this quarter.
A majority, 63 percent, say their business is in good health, and 64 percent are comfortable with their cash flow. These results remain unchanged. In addition, 69 percent said they have retained the same number of employees over the past year, while 19 percent report increasing staff over the same period.
However, just 38 percent said they plan to increase investment over the next year, down from 47 percent last quarter.
“This quarter, small businesses’ concerns over inflation are soaring, and their view of the broader economy is darkening, though they still report that their own businesses are in good health,” Tom Sullivan, vice president of small business policy at the U.S. Chamber of Commerce, said. “Small business owners are pulling back a bit on spending as they see storm clouds in the economy appearing ahead.”
Inflation remained the top challenge for the fifth straight quarter, as 54 percent cited it as such. Other top concerns include revenue (22 percent), supply chain issues (21 percent), interest rates rising (16 percent), employee retention (11 percent), and affording healthcare/benefits (10 percent).
Further, small business owners cited various barriers to securing financing for their business, including a time-consuming application process (52 percent), not having enough information on available sources of capital (46 percent), and not having enough revenue or assets to qualify for a loan (46 percent).
“Despite anticipating potential economic headwinds in the coming months, it is encouraging to see that the majority of small business owners say their business is in good health,” Cynthia Smith, senior vice president, Regional Business at MetLife, said. “It is also promising to see the majority have been able to retain and attract talent. Small business owners have remained focused and determined, so it is not surprising to see them persevering in uncertain times.”
The MetLife and U.S. Chamber of Commerce Small Business Index surveys approximately 750 small business owners and decision makers. The Q1 2023 survey was conducted from Jan. 16 – Feb. 2. It is designed to take the temperature of the sector and see where small business owners are confident and where they are experiencing challenges.