Higher energy costs have negative impact on small business owners

Fueled by a sense that rising energy prices might trip up economic growth, small business owners became less optimistic in March, said analysts with IHS Global Insight.

This comes on the heels of six consecutive months of improvements in small business optimism. ??Furthermore, respondents expecting the economy to be worse in six months outweighed those expecting a better economy. Small business optimism is now standing at its lowest level since November.??After six consecutive months of improved outlook of future revenue, small business owners became less optimistic that sales will increase in the next three months. This is very problematic in light of increased fuel costs.

In an interview with Supply Chain Management Review – LM’s sister publication – economist Leslie Levesque said that retailer’s inventories are not likely to increase.

“Retailers have been keeping their stock at appropriate levels,” she said.??The higher fuel cost appears to have already trickled down, placing pressure on small businesses in charging more for their goods and services, however. The net percent of small business owners planning to raise prices in the next three months jumped to 6 percent, its highest reading since September.”??

“With a more lackluster outlook on inflation, sales and overall business conditions, it is no wonder employment expectations weakened,” said Levesque. “The drop in net respondents planning to hire brought the reading to its lowest point in almost a year. This is consistent with last Friday’s disappointing employment report.”??According to IHS, this is not a good report.

“The hit to small business optimism was expected and any relief in the near term will be limited as they try to cope with rising fuel costs. Small businesses expect lower sales, higher costs, and feel pressure to increase their prices.

“They are feeling squeezed,” said Levesque. “Under these conditions it is no surprise they do not feel like going on a hiring spree anytime soon.”