In a poll of small business owners, 76% said that they had not seen an increase in sales during the holiday season as inflation and other economic conditions constrict consumers’ cash, according to Goldman Sachs.
Of small business owners surveyed, 55% said that their profit margins decreased this year, and a further 70% said that their own personal spending plans for their families were negatively impacted following their own assessment of the state of the economy, according to a poll by Goldman Sachs conducted from Dec. 1 to Dec. 8 of 337 small retail business owners. Consumer spending previously slowed in October as the Americans’ savings declined to $768.6 billion in the month, down from the over $1 trillion held in May and even further from the all-time high of almost $6 trillion held in April 2020.
“The holiday shopping season is a critical time for any retailer, but, unfortunately, small businesses are not seeing the kind of increase in consumer spending that will give us a big sales boost to close out the year,” Alexzandra Denis, owner of Avalah in New York City, told Goldman Sachs. “The result of these difficult times for small businesses means not only are our business’ bottom line hurting, but our personal holiday spending budgets are taking a hit, too.”
Around 67% of small businesses surveyed noted the decline in relative sales was due to consumers having less disposable income, and around 31% noted the hardship the rise of online shopping has had on brick-and-mortar businesses, according to Goldman Sachs. Another 67% noted that the economy in 2023 is tougher than in previous years.
Following the struggling sales, 21% of businesses said they would need to lay off workers or curb hiring plans, and 22% noted they would have to delay reinvestment in their business, hampering growth, according to Goldman Sachs. Around 13% of businesses also noted that they would need to take out a line of credit to make up the difference in profits.
The Federal Reserve has tightened credit conditions by putting its federal funds rate in a range of 5.25% and 5.50%, the highest point in 22 years, in an effort to tame high inflation. Inflation is also putting pressure on average Americans’ wallets, with prices rising 17% since President Joe Biden took office, constricting consumer spending.
Will Kessler on December 18, 2023
