Inflation Intelligence: The Impact of Inflation on US Businesses
Despite inflation rates somewhat settling over the summer, wholesale prices continue to climb, and the cost of living remains a challenge for millions of Americans. So, with the holiday season on the horizon, what can consumers and businesses expect in the coming months?
Well, we surveyed 300 business owners to get a clearer picture of the overall impact of inflation over the past two years. All in all, we discovered that despite settling rates, the majority of people are still feeling the lingering effects, closely monitoring inflation, and adjusting their strategies to stay afloat.
But are some sectors struggling more than others? And in which states is the impact at its severest? Dive into our insights below for a more in-depth analysis.
The impact of inflation on a national scale
First things first, let’s take a closer look at the national consensus on the topic of inflation. Put simply, the general sentiment is negative, with 85% of people admitting their business has been negatively impacted by inflation over the past two years. Plus, a whopping 94% admitted that they still closely monitor inflation, with 64% predicting that their profitability will go down over the next year.
However, many businesses are putting strategies in place to try and counteract the impacts of inflation. For instance, 84% of our survey participants said that they’ve adjusted their pricing strategy over the past year, with 60% stating that doing so has had a positive impact on performance.
Some other popular strategies include factoring in price increases, with 61% of our participants mentioning this, and a further 55% stated that they’ve reduced operating costs.
The states most impacted by inflation
To provide a broader picture, below we’ve pulled together a state-by-state breakdown of the hardest hit states. The impact score was calculated based on five factors: the businesses’ monitoring of inflation, adjustments in pricing strategy, impact on profitability and efficiency of strategies put in place to counter inflation. States most negatively affected by inflation and whose strategies were the most unsuccessful received a high impact score.
1. Maine
Maine tops our ranking with a score of 80.40. 100% of those we surveyed in Maine mentioned the increase in energy costs, and all of our Maine participants also said that they’d delayed either investments or hiring in an attempt to mitigate the impact of inflation.
However, while Maine tops our ranking, only 1% stated that the strategies had been unsuccessful, signaling that progress has been made.
2. South Dakota
Next up, we have South Dakota, a state with just a slightly lower score of 80.00. All of our South Dakotan participants said they were still closely monitoring inflation, and they all also mentioned that they’ve had to delay the speed of investments and hiring over the past two years.
It’s an even split success wise, with 50% mentioning that strategies have been unsuccessful.
3. Tennessee
Tennessee stands at the midpoint of our ranking, with a total score of 76.60. 83% of our participants said they were actively monitoring inflation, and all of our participants from Tennessee said that they’ve had to adjust their strategies because of it.
Finally, 33% admitted that the measures they have been implementing have been unsuccessful.
4. Mississippi
In fourth place we have Mississippi, a state that totals a slightly lower score of 75.00. In Mississippi, 75% said they have had to adjust their strategy due to inflation, with 50% stating that supply chain/ distribution costs have been the most severely impacted.
Finally, a further 50% admitted that the strategies implemented have not had as much success as they’d have liked.
5. Iowa
The final state to complete our top five is Iowa, with a score of 73.20. 67% of those in Iowa mentioned that customer demand and pricing had been impacted the most, and 100% of those we surveyed said that they’ve had to reduce operating costs.
The industries most impacted by inflation
Next, let’s dive into a quick roundup of the hardest-hit industries. In the top spot with a score of 80.73 we have the leisure and sport/ entertainment & recreation industry. When asked about the specific areas impacted, a huge 80% of our participants mentioned customer demand and pricing, with 60% commenting on operating costs.
The second industry is wholesale & distribution, totaling a score of 79.15. 80% of our participants revealed they are expecting a negative impact on profitability in the next twelve months, with 25% mentioning that the strategies they’ve implemented have been unsuccessful.
The real estate and property services industry is next, with a score of 78.55. 80% of participants highlighted the negative impacts of inflation, and a whopping 90% revealed that they’ve had to adjust their pricing strategy.
Next up is the automotive industry, with a total score of 70.30. It appears that supply chain and distribution costs have been heavily impacted, with 100% of participants mentioning this.
And in the final spot we have the transport and storage industry, which scored 68.00. Again, 100% of participants mentioned the negative impact of inflation, with 60% also admitting they’re expecting a similar story over the next twelve months.
The impact of inflation on small businesses
Finally, what about the impact on smaller businesses specifically? Well, the general sentiment surrounding inflation is negative, for instance:
88% of participants are closely monitoring inflation
92% have seen their business be negatively impacted in the past 2 years
75% expect profitability to go down in the next year
When it comes to the negative impact on operating costs (such as energy and materials), 71% of those we interviewed highlighted this as a standout issue. One participant offered further insight, stating: “inflation has affected every aspect, from everyday operating costs like heating and cooling our facilities to purchasing and transporting materials and goods.”
Customer demand and pricing was also brought up (47%), as well as employee wages/ benefits (37%). As a result, 81% of businesses have had to adjust their pricing strategy in the past year to account for inflation.
Many in smaller industries seem to have put strategies in place, with 63% admitting that they’ve had to raise prices to keep up with increased costs. 30% mentioned that they’ve diversified suppliers, and 35% stated they’ve had to delay investment and hiring.
Another of our participants conveyed their frustrations, revealing “everything costs so much now so we have had to switch suppliers, and we have held off on hiring more employees. We have been trying to expand but with inflation, it is just not worth it.” Despite putting strategies in place to counter inflation, only 49% claimed theirs have been effective.
So, there we have it: a detailed picture of the impact of inflation on businesses across the US. From operating and supply chain costs to access to finance and employee benefits, there are various areas that have been negatively impacted over the past couple of years. And despite rates settling, it’s clear that the reverberating effects are still being felt.
However, it’s not all doom and gloom, as through adjusting their strategies, business owners are finding ways to work towards alleviating the impact.
If you’re a small business owner looking for ways to bounce back, why not start with streamlining your payment processes? Simply contact us and speak with a member of the SumUp team today. We’ll talk you through SumUp POS, as well as our business account option, ideal for helping you keep on top of your finances.
Finally, why not check out a couple of our business guides? These offer handy entrepreneurial advice, as well as insight on current business trends.
Methodology
The Inflation Intelligence report is the result of a comprehensive national survey conducted by SumUp US. The survey involved 300 business owners from across the country, and it aims to find out about their knowledge of inflation and the impact it has had on their business over the past two years.
