Despite Stubborn Inflation, Small Business Owners Are Gaining Confidence in the Economy

Despite concerns about inflation’s staying power, entrepreneurs are starting to feel more upbeat about the economy. 

Confidence among small business owners improved in the first quarter of this year, according to the Small Business Index compiled by MetLife and U.S. Chamber of Commerce. The survey, which polled approximately 750 small business owners between January 26 and February 12, rose to 62.3, up from 61.3 in the fourth quarter of 2023. 

That improvement was driven in part by a surge in economic sentiment with nearly one-third of business owners reporting the U.S. economy is in good health, an increase of seven percentage points from the fourth quarter of last year and 12 percentage points from this time last year. Entrepreneurs felt even more optimistic about the state of their local economy with 38 percent saying it is in good health, up from 30 percent in the fourth quarter of 2023. 

The vast majority of businesses are also feeling confident about their own finances. About two-thirds of business owners reported the overall health of their business is good, and they are comfortable with their current cash flow. 

“While headwinds remain, confidence is ticking upward,” said Tom Sullivan, vice president of small business policy at the U.S. Chamber of Commerce, in a statement with the survey release. “Small businesses’ perceptions of the economy are drifting upward, with businesses reporting being comfortable with their cash flow and the health of their business.”

When asked about their biggest challenges, more than half of small business owners cited inflation, which has remained their most pressing concern since the start of 2022. The survey also found that revenue was an emerging problem. In the first quarter, 29 percent of business owners reported it as their biggest challenge, up from 22 percent in the fourth quarter and hitting levels not seen since 2021. 

Entrepreneurs were also polled about future threats, and the top fears they cited were cybersecurity, supply chain breakdowns, and another pandemic. Still, small business owners have been busy preparing for these potential hazards and feel ready to withstand the worst if need be. More than one-third of small businesses report building out existing supply chains in the past year.