Inflation remains high for four consecutive years, and small business owners are most worried about cost pressure - Bank of America survey
The Bank of America 2025 Business Owner Report shows that inflation has exceeded the Federal Reserve's 2% target for four consecutive years, becoming the top concern for small businesses. 70% of respondents view inflation as the primary risk, 64% have raised prices, and 77% report an average cost increase of 18%. Despite an uncertain economic outlook, 74% of businesses remain positive, 59% plan to expand, and 43% intend to increase hiring.
Key Finding: Inflation Dominates Small Business Risk Expectations
A nationwide survey released by Bank of America shows that,7 out of 10 small businesses view inflation as their most prominent business concern in the coming monthswith 64% of them having raised prices on goods or services. The survey, covering 819 business owners, reflects that price pressures are profoundly impacting operational decisions across the U.S. small business sector.
Rising Costs and Cash Flow Reassessment
Survey data shows that price pressures have forcednearly four in ten (39%) small businesses to reassess their cash flow and spending plans for the coming year. Bank of America noted in the report that over the past year, 77% of small business owners reported an average 18% increase in operating costs; meanwhile, 76% have chosen to raise prices, with an average increase of 12%.
Despite ongoing cost pressures, small business owners' overall confidence in the outlook has not been significantly undermined.74% of surveyed businesses said they are entering the new year with a positive mindsetwith 59% planning to expand their business scale and 43% intending to increase headcount.
"Many small business owners are approaching the next 12 months with cautious optimism, with nearly three-quarters expecting revenue growth and about four-fifths planning to obtain financing through business credit cards, personal savings, and traditional bank loans," said Sharon Miller, President of Business Banking at Bank of America, in a statement. "Over the next year, more than half plan to expand operations, and slightly fewer than half plan to hire."
Macro Context: Inflation Data and Policy Uncertainty
Notably,inflation has remained above the Federal Reserve's 2% target for more than four consecutive years. Measuring price pressures has become more difficult due to the suspension of data collection during the 43-day federal government shutdown, adding extra uncertainty to policy judgments.
Delayed Release of Employment Data
The murky state of the economic outlook is expected to persist into next month. The Bureau of Labor Statistics said Wednesday thatthe October jobs report will be delayed until after the Federal Reserve's final meeting of the year on December 9-10. The Bureau plans to release September's employment data this Thursday.
Latest Inflation Readings
In the most recent inflation indicator,the Consumer Price Index (CPI) rose 3% year-over-year in Septemberup 0.1 percentage point from August. Core CPI, which excludes volatile food and energy prices, also recorded a 3% year-over-year increase.
Atlanta Fed President Raphael Bostic said last week that the September CPI increase suggests the Fed's preferred inflation gauge—the Personal Consumption Expenditures (PCE) price index—may have risen 2.7% for the month. He expects thatinflation will not show a clear slowdown until mid-2026 at the earliest。
Growing Divisions Within the Fed
The coexistence of a weakening labor market and persistent inflation has led to divisions among Federal Reserve officials over whether to cut the federal funds rate at the next meeting. According to minutes from the late-October policy meeting released last Wednesday, opinions within the decision-making body are highly fragmented.
The minutes stated: "Participants expressed widely differing views on the most appropriate policy decision for the Committee's December meeting." Since the last meeting, some Fed officials have warned about the risks facing the central bank's dual mandate of ensuring price stability and maximum employment, but none have committed to cutting rates or holding them steady at next month's meeting.
Statements from Regional Fed Presidents
Richmond Fed President Tom Barkin said in a speech Tuesday: "Inflation is still above target" while also noting the labor market is softening. He added: "Our outreach efforts convince me that inflation remains relatively high, but a significant surge is unlikely. At the same time, we hear from clients who are weary of rising prices."
Barkin deliberately avoided hinting at the future policy path: "You may have noticed that nothing I've said provides any guidance for our next meeting. That is intentional, because I believe there is much we need to learn between now and then.”
Conclusion: Expansion Intentions Amid Cautious Optimism
Despite the still unclear macroeconomic outlook, the Bank of America survey captures positive signals from the small business sector. In an environment where cost pressures and policy uncertainties intertwine,59% of small businesses plan to expand, and 43% plan to increase hiringdemonstrating the resilience and adaptability of this economic segment in navigating inflation challenges.