Many small businesses started reporting renewed optimism after COVID-19 vaccinations led to the reopening of the economy. Now, business owners face another challenge: Inflation.
The economy keeps showing signs of a rebound, which offers plenty of hope for small businesses. Confidence among small businesses in the U.S. increased in June 2021 to an eight-month high, according to data from the National Federation of Independent Business (NFIB) Optimism Index. Job openings and hiring plans for the next three months are also hovering at or near record highs. However, many businesses were hit hard by the pandemic and still encounter unique challenges on their road to recovery. Among these challenges is inflation.
Inflation and the new normal
Inflation is typically measured by changes in the consumer price index (CPI) maintained by the U.S. Bureau of Labor Statistics (BLS). The index, which tracks the change in prices of a basket of common consumer goods and services, increased 5.4% in June from a year earlier. The rise in U.S. inflation can be attributed to an economy reopening as COVID-19 pandemic restrictions loosened. Supply-chain issues and a boost in demand are major factors.
Consumer Price Index
Costs for many things have increased, putting a burden on small businesses. Business owners, feeling the frustration of higher prices as consumers themselves, might be hesitant to pass along the costs to their customers.
Meanwhile, many small businesses are struggling with hiring since the economy reopened. Although hiring expectations are high, the reality is hiring has been difficult due to pandemic-related causes, including child-care and health-care concerns and unemployment aid buffers.
How you can prepare for inflation
As a business owner, besides looking out for the needs of your business and employees, you also pay attention to your individual investment plan. There are several ways you can invest and spend money for your business—purchasing inventory, making upgrades, hiring more employees. Do you also have a plan for your personal finances?
Inflation might chip away at the wealth you have built; thus, part of financial planning requires figuring out how to inflation proof your portfolio to withstand gradual increases in prices for goods and services. A knowledgeable Janney Financial Advisor can help you consider and evaluate your personal and business options and develop a comprehensive plan to fit your unique needs.