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Small businesses are increasingly worried about the financial implications of high inflation, and the vast majority of owners say the worst is yet to come.

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That’s according to new Chamber of Commerce and MetLife research released Wednesday, which found that a staggering 90% small business owners worried about the consequences of the highest inflation in almost four decades. More than half – 54% – of respondents said they were very concerned, up 23 percentage points from early 2022.

“There has been optimism in recent quarters from small businesses that still feel good about how their business is going,” said Tom Sullivan, vice president of small business policy at the Chamber of Commerce. “However, inflation is really hitting small businesses hard, and this reality is negatively impacting their confidence, their ability to hire, invest in their business, and grow.”

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Inflation, which was stronger-than-expected in August, climbing 8.3% year-on-year, is now seen as the biggest financial challenge for small businesses. About 45% of owners said their only main concern was price increases, up 11 percentage points from the start of the year. By comparison, 28% of those surveyed ranked supply chain bottlenecks as number one. Other issues include income, rise in interest rates and COVID-19 safety protocols and compliance.

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To cope with higher prices, about 7 out of 10 businesses said they were raising costs for consumers. On top of that, almost half – 46% – reported taking out a loan to help cover higher expenses, and about 35% reported taking pay cuts.

Small business owners are also increasingly concerned about the economic outlook. About 88% of owners expressed concern that a recession would hit the US next year, with 54% saying they were “very concerned.” Most small business owners (59%) believe the economy is in “somewhat bad” or “very bad” health.

However, when asked to choose between lowering inflation or averting an economic downturn, a majority – 59% – said fighting higher prices should be a priority now, while 41% preferred recession prevention.

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Despite headwinds, small businesses said they remain relatively optimistic about their operations and expectations for the future. About 66.8 people stated that their business is in good condition; this is higher than the low of 39.5 recorded in 2020, at the height of the COVID-19 pandemic.

The survey was conducted from April 29 to May 17.

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While economists had hoped inflation would slow down since then as supply chains improved, consumer prices remain stubbornly high.

Despite expectations of slower growth in August, prices actually rose by 0.1%; even more worrisome, benchmark prices, which exclude more volatile food and gasoline performance, also rose more than expected, a sign that underlying inflationary pressures in the economy remain strong.