61% of Main Street Businesses Raised Prices to Offset Inflation

As inflation drove costs up, most Main Street businesses got busy hiking their own prices too.

While small- to medium-sized businesses (SMBs) are typically reluctant to take this route, new PYMNTS research revealed that the majority of SMBs have reacted to rising supplier costs, energy, rent, labor and other higher expenses by increasing their prices.

In the study “Main Street Health Survey Q4 2022: SMBs Brace for a Recession,” PYMNTS looked at how these businesses are dealing with the inflationary headwinds, noting that “profit margins have narrowed for many SMBs. While the overall share of firms that increased prices in the last three months remained at approximately 60%, a larger number of construction firms, 71%, have done the same.”

Conversely, just 38% of firms in professional services increased prices, and PYMNTS found fewer firms than last quarter saying that lowering costs or improving productivity were their main actions to offset inflation’s effects.

Giving context to price increases among Main Street SMBs is the fact that, as the report stated, “64% of Main Street SMBs expect the U.S. economy to enter a recession, 41% think it is already happening and 20% believe a recession will come in the next six months.”

PYMNTS found that the share of firms that have increased prices in the last three months has remained steady at 61%, slightly below the 63% in the previous quarter.

“Marking up prices has been the primary strategy to fend off inflation’s effects, with 31% of firms saying this was the most important action, up from 29% in July,” the study found. “Fewer firms reported lowering business costs in October 2022, at 11%, compared to 16% in July 2022. Meanwhile, 13% mentioned working on improving productivity in October 2022 and July 2022.”