Economic / Future Trends

Small business confidence ticks up as inflation slows [WSJ/Vistage June 2024]

WSJ Vistage Small Business Confidence June 2024

In today’s economic climate, there are always new challenges for business leaders to navigate. This month, small businesses faced new tariffs and the decision by the U.S. Federal Reserve to hold interest rates steady.

Overall optimism among small businesses swayed back toward the positive as the WSJ/Vistage Small Business CEO Confidence Index rose slightly to 91.0, regaining the minor loss from last month’s dip.

Tariffs have minimal impact on most small businesses

While any new trade policy has business impacts, the latest round of tariffs imposed on Chinese goods is not expected to have far-reaching impacts on small businesses. An overwhelming majority — 84% of small businesses — report no impacts from the tariffs. Most of the CEOs reporting an impact falls within the manufacturing industry, and if they are in the supply chain, they may benefit. However, if they rely on China for supplies, they feel the increased costs.

Among the 3% of small businesses who report a positive impact, John Lucci, President/CEO of FTE Performance Consulting in Troy, Michigan says, “We’ve seen tariffs drive some manufacturers, particularly automotive and electronics, to shift production to North America. Mexico has benefited the most but U.S. manufacturers have also expanded their domestic manufacturing footprint and benefited by having more robust supply chains due to the near-shoring activities.”

On the other end of the spectrum, 13% report negative impacts, including Erik Fleming, President/CEO of Diverse Optics Inc. based in Rancho Cucamonga, California. “The cost of plastic resin produced in China is expected to increase 30%. We now must source elsewhere in Asia and customers aren’t eager to requalify,” Fleming says.

Inflation slows, labor remains top inflationary pressure

Less than half (48%) of small businesses reported that inflation would grow in the coming year; 41% shared that inflation was growing at a slower pace than last year, while 7% reported it was growing at a greater rate. This is a 10-percentage point improvement from March, with 58% of small businesses reporting inflation growth; 51% forecasting slower inflation growth than last year, and 7% expecting higher inflation growth.

Labor is a different story. Of all costs, labor continues to be the top source of inflation, according to 59% of small businesses. In some cases, wages are growing faster than last year. As Allan Cook, CEO of Alco Building Solutions in Arcadia, California, notes, “With the labor pool decreasing and making it very competitive to hire, we are having to offer wages 20% higher than a year ago.”

Considering that 52% of small businesses are increasing their workforce, additional staff at higher wages or hourly rates will impact the bottom line. However, labor costs include health insurance, a benefit many small businesses provide.

Insurance rates on the rise

While just 9% of small businesses report that insurance is their top inflationary pressure, the increased costs are felt by nearly all small businesses. Health insurance boasts the highest increases, with 9% of small businesses reporting increases of greater than 25%, 40% reporting increases between 10% and 25%, and 36% reporting increases of less than 10%.

CEOs are aware that the future might result in greater increases, as Paul Austin, CEO of Waver Manufacturing Company in Flower Mound, Texas noted, “We were fortunate to have less than 10% increase during our renewal period in August of 2023 but I expect much larger increases when we renew later this year.

June highlights:

The June WSJ/Vistage Small Business CEO Confidence Index was calculated from a survey of CEOs and other key leaders of small and midsize businesses in the field June 3-17, 2024; the results reflect insights from 829 respondents that represent companies with $1-20 million in annual revenues.

  • Current Economy: 19% of small businesses believe the economy has improved compared to last year, while 34% think it has worsened.
  • Future Economy: Just under one quarter (24%) of small business leaders expect the economy to improve over the next year, while the same proportion expect it to worsen.
  • Revenue projections: More than six out of 10 (62%) CEOs expect increased revenues in the next 12 months, a four percentage-point increase from last month, while 12% expect decreased revenues.
  • Profitability projections: Nearly half (49%) of small businesses expect increased profits in the next 12 months, while 16% expect profits to decline
  • Fixed investment plans: Over one-third (36%) of small businesses plan to increase fixed investments, while just 13% plan to reduce spending in the next 12 months.
  • Workforce expansion plans: A growing proposition of small businesses (52%) plan to expand their workforce in the next 12 months, while just 8% report expectations that their workforce will decrease.

To explore the full June 2024 WSJ/Vistage Small Business dataset, visit our data center or download the infographic

Category : Economic / Future Trends

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About the Author: Anne Petrik

As Vice President of Research for Vistage, Anne Petrik is instrumental in the creation of original thought leadership designed to inform the decision-making of CEOs of small and midsize businesses. These perspectives — shared through repo

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