CHICAGO — June 15, 2006 — Small business confidence appears to be waning because of inflation fears, according to a survey by SurePayroll, the nation's largest online payroll service provider for small businesses.
Small Business Owner Optimism Plummets
From May to June, small business confidence, based on the number of small business owners describing
themselves as optimistic about the economy, dropped a surprising 24%.
"We've seen slow hiring and rising salary costs in recent months, leading indicators of an inflationary environment," says Michael Alter, president of SurePayroll. "But we had no idea how radical the effect would be on the spirit of the small business owners. Many have quickly gone from the height of optimism to believing the bottom's falling out — and that's scary."
Based on the June survey, 59% of respondents indicated they are optimistic about the economy, whereas the balance of respondents (41%) declared that they are pessimistic about the economy.
That's a significant drop in optimism relative to SurePayroll's May survey, in which 78% responded that they felt optimistic about the small business economy, with the remainder, 22%, indicating that they were pessimistic.
Inflation Fears Rising
Nearly two-thirds (63%) of surveyed small business owners believe inflation will have a negative impact on
their business in 2006.
Many of the comments received during the survey process suggest that the fear of inflation may be dampening optimism even more than actual inflation:
The majority of surveyed small businesses (53%) have seen their costs of doing business rise over the last several months.
Despite rising costs, many have been hesitant to pass along cost increases to their customers. Of those businesses that have incurred increasing supply costs, the vast majority (79%) have not raised their prices to pass along their increasing expenses to their customers.
However, 35% of those respondents are contemplating raising their prices in the future. In contrast, only 9% of those who have not experienced supply cost increases are contemplating raising prices.
No Cure, Thank You Very Much
The de facto cure for inflation is raising interest rates, which can have a cooling effect on the economy.
However, despite their concerns about inflation, 78% of respondents believe the Fed should not raise interests
in late June.
One survey respondent noted that "While I am concerned about inflation, I am more concerned that climbing interest rates will make it more difficult to secure affordable loans."
About SurePayroll's Economic Commentary:
Every month, SurePayroll publishes its small business economic indicators via the SurePayroll Small Business
Scorecard. Based on employee and contractor paychecks for over 16,000 small businesses, SurePayroll's indices
give insights on small business hiring, salary levels and reliance on contractors. SurePayroll regularly
augments its data indices with surveys on a variety of topics of interest to small business owners.
About SurePayroll:
SurePayroll is the online alternative to ADP® and Paychex®. SurePayroll's service and team members are dedicated to providing an easy, convenient online payroll service at a price small business owners can afford. Tens of thousands of customers rely on SurePayroll to process payroll wherever they want in as few as two minutes.
In addition, SurePayroll offers small businesses solutions for managing 401(k) plans, health insurance, workers' compensation, HR compliance and employee screening. For accountants and banking partners, SurePayroll provides private-label services that enable them to offer payroll processing to their small business clients.
Over the last decade, SurePayroll has received numerous prestigious awards for its innovative technology and outstanding customer service, including recognition from PC Magazine, Inc. 500, Accounting Today, the Stevie Awards and many others.
For more information, you can visit http://www.surepayroll.com, call 877.954.7873 or follow us on http://twitter.com/SurePayroll.
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