Inflation May Be Cooling.
What’s Your Best Strategy?

There’s good news and bad news for small businesses on the inflation front.

Many economists and other observers are seeing signs of a significant leveling of costs for goods and services. The indications are not universal, but they’re strong enough to provide reason for optimism.

The bad news? Not everyone agrees with that assessment and, as noted, the indications are themselves mixed. Depending on your market, you could easily be in area that’s still seeing significant cost increases.

What’s an owner or manager to do?

The Good News

Overall inflation is leveling and, in some areas, dropping. Lower food and energy prices have been a key factor in this trend. Over the last year, gasoline costs have dropped considerably, and groceries have seen dramatic reductions in many areas. These and other disinflation trends bring a two-fold benefit for small businesses. They leave more money in consumers’ pockets so they can spend more on other things. These reductions can also lower business costs directly by lowering the cost for supplies and inventory through decreased transportation.

Numbers change almost daily, but the overall picture involved pleasant surprises. In early/mid 2023, Federal Reserve leaders expecte the Personal Consumption Expenditures measure to end the year at 3.2 percent. But by November, that number had dropped to 2.6 percent. The Consumer Price Index has also been coming down, too.

Exceptions include rent, which can be a direct cost for small businesses. That can impact a business owners’ budgets as well as the pocket money for customers. These

What to Do

Each business owner must evaluate their own situation, their unique market, and other challenges. For example, if you’re in brick and mortar, a road project in front of your business could override any national economic trends in terms of your economic outlook. Fuel costs are also notoriously fickle and the current situation in the Middle East could bring major change.

Equally significant, economics is a speculative field, and no one has a guaranteed idea of what will happen in the future. Add in politics and the growing legion of online “experts,” and it’s hard to know who to believe. So here’s a conservative suggestion: remain conservative, but you can safely assume the 2024 economy will continue improving from 2023, and improve dramatically from 2021 and 2022 (unless your business involves Covid vaccine sales and the like).