Written by Samuel Thompson.

The latest federal data reveals that inflation, as measured by the Producer Price Index (PPI), continues to edge upward, leaving small businesses struggling to keep their doors open. According to the U.S. Bureau of Labor Statistics (BLS), the PPI climbed by 0.1% in July, contributing to a total increase of 2.2% over the past year. While these percentages might seem modest, the reality for small business owners is far from trivial. With the costs of essential goods like roasted coffee and dairy products spiking by 9.1% and 9.4% respectively, and pork and processed chicken prices soaring by 12.3% and 10.5%, the financial pressure is mounting.

Meanwhile, a few commodities saw a decrease, such as corn, which dropped by 28.3%. However, this dip does little to counterbalance the overall rise in prices, particularly with energy costs playing a significant role. The BLS reported that energy prices alone surged by 1.9% in July, marking the most substantial increase since February. Gasoline prices, a significant factor for many small businesses, saw a 2.8% jump, and diesel fuel and jet fuel followed suit with notable price hikes. These rising costs are not just numbers; they are the difference between staying afloat and closing up shop for many entrepreneurs.

Energy Costs Drive Inflation Surge

The BLS highlighted that a significant portion of the inflation seen in July could be traced back to rising energy costs. The index for final demand energy climbed by 1.9%, pushing the overall inflation rate higher. The data also pointed out that prices for final demand goods, excluding food and energy, rose by 0.2%, while final demand foods increased by 0.6%. The inflationary pressures in the energy sector are a direct hit to businesses dependent on transportation and logistics, as they now face higher fuel costs, which inevitably get passed down to consumers.

Interestingly, while energy prices surged, other areas saw a decline. Electric power costs decreased by 1.1%, providing some relief, albeit minor, for those relying on electricity. Additionally, prices for fresh and dry vegetables, as well as steel mill products, saw reductions. However, these decreases are not enough to offset the broader inflationary trends, especially with critical items like meats and basic organic chemicals seeing price increases. The volatility in these prices underscores the uncertainty that businesses and consumers face as they navigate an economy where prices are anything but stable.

Economic Concerns Grow Amid Stock Market Volatility

Adding to the economic woes, a sharp drop in the stock market last week has sparked concerns about the future. Despite the recent slowdown in inflation’s rise, the prices of goods and services remain significantly higher than when President Joe Biden took office, with an overall increase of more than 20%. For many Americans, this means that their purchasing power continues to erode, making it increasingly difficult to afford everyday necessities.

Senator Rick Scott, R-Fla., did not mince words following the release of the inflation data. He criticized the Biden administration, stating that the ongoing “Biden-Harris Price Hikes” are driving up the cost of living for both families and businesses. Scott emphasized that these rising costs are particularly burdensome for small business owners, who are being forced to make tough decisions, such as choosing which bills to pay or whether they can afford school supplies for their children. In his view, the current economic policies are failing to protect the American Dream, leaving families struggling to make ends meet.

Our Take

The ongoing inflationary trends, exacerbated by rising energy costs, are a clear indicator of the current administration’s failure to manage the economy effectively. Small businesses, often seen as the backbone of the American economy, are being pushed to the brink as they struggle to absorb these costs without passing them on to consumers. This situation not only threatens the viability of these businesses but also undermines the financial stability of millions of American families. The continual rise in prices, despite recent attempts to curb inflation, suggests that more robust measures are needed to address these economic challenges. Until then, the dream of prosperity will remain elusive for many, as they grapple with the harsh realities of an economy that seems increasingly out of their control.