MARY REICHARD, HOST: It’s Thursday the 2nd of June, 2022.
Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Mary Reichard.
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REICHARD: Alright. Well, next up: rising prices.
The current spike in inflation is one of the worst in recent history. As you probably know from experience, it’s been hard on consumers. But it’s also hard on small business owners, who are squeezed between the rising cost of raw materials and the upper limit of what customers are willing to pay for the finished product.
BROWN: WORLD’s Josh Schumacher recently spoke to several business owners in northern California to find out how they’re coping.
JOSH SCHUMACHER, REPORTER: The streets of downtown Livermore are sunny. This is northern California, after all. They’re also pretty lively. It’s lunch time, so the tables outside coffee shops and restaurants are full. Shoppers walk in and out of small town boutiques.
But that doesn’t mean business is booming.
Bellina Keener manages the Olive Oil Pantry 2. It sells specialty local cooking oils and balsamic vinegar blends. She says the cost of everything has gone up.
KEENER: From our bottle prices to a lot of our products prices. So of course, it's going to cost the customer more, which makes it harder on us as we like to keep our prices at, you know, a reasonable amount.
The store’s owners didn’t want to raise prices. But eventually, they had to.
SCHUMACHER: How have the customers responded to that?
KEENER: They've actually been really good about it. Because we did have to raise the price on our bottles. And for the most part, they don't ask that. When they do, we just explain. You know, we have it, we're being charged more, so we have to charge you more.
Desmond Lachman says that’s inflation 1-0-1. Lachman is a senior fellow at the American Enterprise Institute.
LACHMAN: They've got to pay a whole lot more for everything they buy, you know, ranging from gasoline to food to anything you can think of, the prices are now going up.
And Lachman says that puts small businesses in a particularly difficult position.
LACHMAN: Yeah, I would think that small businesses are probably less well capitalized, you know, the less well prepared to deal with this. You know, what inflation does is it injects a whole lot of uncertainty, you know, how long is this inflation going to last? Is this inflation going to get worse? You know, should I raise my price or not? What happens if I raised my prices, you know, that I might be losing consumers - this really puts smaller businesses in a particularly difficult situation.
And that’s on top of an already difficult last few years.
LACHMAN: Businesses, and I guess, consumers as well, you know, they've had really a rough time, the last couple of years. First, they got hit by the whole pandemic lockdown, you know, so there were huge disruptions to businesses, to individuals.
According to a recent Goldman Sachs survey, over 90 percent of small businesses across the country reported negative effects from inflation, supply chain issues, and other economic challenges during the past several months. In another survey, about half of small or local business owners said this historic wave of inflation could force them to close within the next six months.
And that could spell trouble for the U.S. economy. Small businesses make up about 44 percent of the country’s economic activity.
AUDIO: [Espresso Rosetta]
Just down the street from the Olive Oil Pantry, Espresso Rosetta has a few customers scattered across its indoor and outdoor tables. Mercy Schneider owns the coffee shop. She says she’s struggled with challenges related to the pandemic and supply chain problems for what feels like a really long time.
SCHNEIDER: It's such a weird time right now with things coming out of COVID. Like, I don't know if we're more busy or less busy, because all of the numbers that I have for years are all skewed.
And now she has to factor inflation into the equation.
SCHNEIDER: I'm not sure how much of that has to deal with supply chain problems and in general and how much it's inflation. But I'm certainly having to keep a very close eye on my cost these days and adjust menu accordingly.
Despite those challenges, Mercy Schneider is optimistic.
SCHNIDER: I'm a student of history. And the last time we saw a similar set of circumstances nationally was in the 1970s. We had a similar major inflation, we had similar economic pressures. So if I'm looking at what I think is going to happen, I look to what happened at that time.
Eventually, prices came down. But it took a while.
SCHINDLER: So I personally suspect we're going to see a period of incredible inflation probably teamed up with shortages in critical areas. And I really hope that we come out of it in a booming economy, like we did at the end of the 70s. But at the moment, I think that this is, I suspect, this is only the beginning of the pain.
Reporting for WORLD, I’m Josh Schumacher in Livermore, California.
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