US Economy’s Backbone Stagflation Warnings Spark Uncertainty Spike!

A recent survey of small businesses has raised concerns about the economy, indicating potential stagflation pressure. President Donald Trump’s uncertain actions on federal layoffs and tariffs have left companies unsure about future decisions, leading to uncertainty regarding prices, costs, and expansion plans. Small businesses, which make up the majority of the American workforce, are signaling warnings about potential stagflationary pressures.

The NFIB Small Business Optimism Index dropped by 2.1 points in February to 100.7, while uncertainty levels rose by 4 points to 104, the second-highest level on record. Other troubling findings include reduced optimism about economic improvement, dimmer sales expectations, and worsening profit trends.

There are growing concerns about stagflation, a combination of slower growth or contraction alongside increasing inflation. Only 12% of business owners believe it is a good time to expand, marking a 5-point decline from January—the largest monthly decrease since April 2020. Additionally, the percentage of business owners raising average selling prices spiked by 10 points from January, the most significant increase since April 2021.

The NFIB report highlighted the fading confidence in economic growth, despite a new administration taking office. Factors contributing to this uncertainty include US tariffs, retaliatory actions from affected countries, government layoffs, and reduced spending. The report also noted that many small businesses rely on work from firms with government contracts.

The increasing pessimism among small-business owners is mirrored by consumers, whose spending drives the GDP and has previously helped the economy weather Fed rate hikes. The University of Michigan sentiment survey plummeted by 11% due to inflation concerns, with year-ahead inflation expectations rising to the highest level since November 2022.

Torsten Sløk, chief economist at Apollo Global Management, described the current economy as a “wait-and-see” scenario, with consumers and firms becoming more cautious with their spending decisions. The uncertainty facing small businesses is at near all-time high levels, posing a significant challenge given their crucial role in the economy.

This article was originally published on Fortune.com.

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