It should come as no surprise that inflation is the top concern in the most recent poll of small business owners conducted by the NFIB. What surprises me is that it has taken so long for people to pay attention.
Since 1983, the average percent of owners in the monthly NFIB poll citing inflation as a top problem has been 3 percent. As recently as February 2008, only 8 percent cited inflation as their top problem. By May, 17 percent said inflation was their top concern, and in June it shot up to 20 percent. To be honest, I worry that it is not even higher right now. The beast of inflation is on the loose and will likely be with us for quite a while.
Small business owners are planning to keep on spending — a sign that any recession will be short and not very deep. I have argued all along that Washington is paying attention to the wrong economic issue. Plans for hiring and capital spending, as well as job openings, inventory investment plans and expected credit conditions, are all stronger than in past recessions.
Among those surveyed, expectations for real sales gains and improvements in business conditions are as bad as in 1980-82, the worst economic period in recent years. But this time is is will be inflation induced, and not a true deep downturn in economic activity. I see an economy that will be going nowhere faster and faster and faster. That is what long term inflation can do an economy. We will be busy, but will make little real progress due to the beast of inflation eating up any progress through a higher cost of doing business.