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Small businesses risk shutting down in droves amid elevated inflation, energy prices

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Casey Harper

(The Center Square) – Nearly half of American small business owners say they are at risk of closing this fall, according to new survey data.

The small business network Alignable released the survey, which found that “47 percent of small business owners … say their businesses are at risk of closing by fall 2022, unless economic conditions improve significantly.”

“That's up 12 percentage points from last summer, when only 35 percent were concerned about economic issues forcing them to shut down,” Alignable said. “And SMBs in key industries face even bigger problems: 59 percent of retailers are at risk, along with 52 percent in construction, 51 percent in the automotive sector, and 50 percent of restaurant owners.”

Those tough economic conditions include soaring inflation. The U.S. Bureau of Labor Statistics released inflation data last week showing consumer prices rose 9.1 percent in the previous 12 months, the highest in more than four decades, and the BLS Producer Price Index rose 11.3 percent, nearly the highest ever recorded.

Forced pandemic-era economic shutdowns also crushed many businesses that have yet to bounce back.

“Supporting these unfortunate trends, the total percentage of SMBs reporting that they've fully recovered has dropped 7 percentage points since last summer,” Alignable said. “In the Summer of '21, 33 percent were fully recovered. But now, that number has declined to a new low: just 26 percent.”

Prices also hit record highs for regular and diesel gas in June before dipping back down. The current prices, though, remain much higher than the same time last year.

Amid the economic difficulties, some states are struggling more than others, with more business owners reporting they risk shutting down this fall.

“Looking at different states and provinces, small businesses in CO (54 percent), MI (52 percent), OH (51 percent), PA (51 percent), and Texas (51 percent) are struggling the most,” Alignable said.

Two other recent surveys have also raised the alarm about small businesses owners’ sentiments about the economy, as The Center Square previously reported. In June, Alignable released a survey showing that 35 percent of U.S. small business owners “could not pay their rent in full or on time in June.”

“Most small business owners attribute this worsening situation to record-breaking inflation, which includes escalating gas, labor, and supply costs,” Alignable said. “Simply put, there’s less money available to pay the rent.

“Even more alarming, 63 percent of transportation SMBs couldn’t afford June rent, up 41 percent from May,” Alignable added. “It's no shock to learn that 76 percent of this group said gas prices have had a ‘very significant’ negative effect on their businesses.”

Another poll released in late June, this one from the Small Business and Entrepreneurship Council, showed that 88 percent of small businesses are concerned a recession is around the corner.

“There’s little breathing room for our nation’s small business owners and their employees,” SBE Council president and CEO Karen Kerrigan said. “They’ve gone from one set of economic challenges to the next over the past couple of years, and now they are vastly cutting back on spending and investment, which will have a harmful effect across the economy.”