Small businesses lose confidence in U.S. economy

Small businesses are flashing warning signs on the U.S. economy as inflation, supply-chain snarls, a shortage of workers and rising interest rates darken the outlook for entrepreneurs. Fifty-seven percent of small-business owners expect economic conditions in the U.S. to worsen in the next year, up from 42% in April and equal to the all-time low recorded in April 2020, according to a survey of more than 600 small businesses conducted in May for The Wall Street Journal by Vistage Worldwide Inc., a business-coaching and peer-advisory firm. The measure is one part of a broader confidence index that in May posted its largest year-over-year drop since the Covid-related shutdowns of April and May 2020. Despite rising prices, the portion of small businesses that expects revenue to increase in the coming year fell to 61%, down from 79% in May 2020.

“It just feels like there are all of these factors that are out of our control, and it doesn’t seem like there is a light at the end of the tunnel,” said Minnie Luong, owner of Chi Kitchen, a manufacturer of kimchi and other fermented Asian-flavored vegetables. The Pawtucket, R.I., company, which has eight employees, has faced a roughly 50% increase in raw-materials costs and shortages of glass jars used in packaging. Ms. Luong raised prices for wholesale retail accounts by 5% in May. It was the company’s first increase for those customers in its seven-year history, but not enough to cover rising ingredient costs. Sales have slowed in recent weeks, said Ms. Luong, who isn’t sure if the May price increase, seasonality or a pullback in spending is to blame. “I don’t know what it is, but I don’t like it,” she said.