What the Current Inflation Rate Means to U.S. Small Businesses

The U.S. economy is shifting in ways that directly impact small businesses. The latest inflation rate is 2.92%. Inflation is a top pain point as 48% of small business owners expressed in a recent quarterly U.S. Chamber of Commerce survey. Other concerns include supply chains, employee retention and benefits.1

U.S. inflation data suggests specific sectors are especially vulnerable. Entrepreneurs in retail (55%) and service (54%) are the most concerned about the business implications of inflation.2 This is understandable given consumer pessimism regarding job availability and income.

• Inflation remains stubbornly high.

  Though the Federal Reserve lowered the interest rate range to 4.00% - 4.25% in September 2025, it is still above the agency’s 2% target. Inflation dropped over the last three years, but costs are high for goods, supplies and labor. The rise in costs is causing margin pressure, as small business owners must rethink how expenses and pricing strategies will affect cash flow. These entrepreneurs are carefully watching how inflation is affecting small businesses before making critical operational decisions. Subsequent decisions could prompt delayed investments in expansion until economic conditions stabilize.
  
  

• Supply chain disruptions are driving up the cost of goods.

  Persistent supply chain bottlenecks are keeping costs elevated and delaying product availability, especially for import-reliant sectors. Tariffs are an element of rising supply chain costs that will severely impact small businesses.
  
  How do tariffs affect small businesses? Based on 2023 import statistics ($868 billion in goods), the U.S. Chamber of Commerce estimates a cost of $202 billion in annual tariff tax to small businesses.3 Tariffs have direct pricing implications, as businesses must decide whether to absorb the increased cost of imports or pass them on to customers. Seventy-five percent of small business owners say rising prices significantly affected their operations and 65% said they’d raised prices within the last year due to inflation.4
  
  Consumer confidence and outlook on current and future financial circumstances slumped with concerns about jobs, unemployment and the rising cost of living.5 Since last year, food and shelter, utilities and commodities rose. Anticipating further tariff-related price increases, two-thirds of consumers — including middle-income households — reduced discretionary spending.6 As the consumer price index continues to rise, shoppers are less likely to buy big-ticket items like cars and vacations, or services.7
  
  The question is whether cash-strapped consumers will pay higher prices for the same or reduced (e.g., smaller sizes or lower quality) goods, find a lower-priced option or abandon purchasing some discretionary items altogether.
  
  

• Labor shortages continue.

  The U.S. is experiencing a long-term labor shortage so intense that experts estimate the necessary hiring rate to keep pace with demand is four times that of the last 10 years or 4.6 million workers.8
  
  Lack of qualified workers is pushing wages and benefits higher, as well as making it harder for small businesses to compete in talent recruitment and retention. These companies understand that labor shortages will persist and that they must invest in retention strategies, including appealing benefit packages. With stakes so high, 67%  of respondents in the U.S. Chamber of Commerce’s survey would like external help in determining employee compensation and benefits.9