LANSING — If your summer vacation seems more expensive, your favorite restaurant raises prices again, or that long-delayed home repair costs more than expected, Michigan small businesses say rising costs are increasingly forcing them to pass those expenses on to customers.
A new survey from the National Federation of Independent Business (NFIB) found small business owners are growing more pessimistic about the economy while preparing for higher costs tied to inflation, fuel, electricity, labor and supply-chain disruptions.
In simple terms, small business owners are becoming less confident and more nervous about what the economy will look like later this year.
The result could be higher prices for consumers across Michigan just as the busy summer travel season gets underway.
“There’s no avoiding the additional burden fuel and electricity prices are imposing on small businesses and their customers,” said Patrick Anderson, founder and CEO of Anderson Economic Group in East Lansing. “This is increasing costs for small businesses just as summer air conditioning and vacation spending is heating up, and also taking a bite out of their customers’ wallets.”
What This Means For Michigan Consumers
- Higher restaurant and retail prices
- More expensive home repairs and maintenance projects
- Increased vacation and travel costs
- Higher delivery and transportation charges
- Fewer job openings at small businesses
- Slower business expansion and investment
The survey arrives as inflation recently climbed to its highest level in nearly three years while gasoline prices in parts of Michigan remain above $4 per gallon.
For many small businesses, energy costs are becoming impossible to ignore.
“Gas and diesel prices are something consumers see every week, and electric bills show up every month,” Anderson said. “These have both a financial and a psychological effect. Moreover, you can’t escape them. Even if you buy an electric car and think you’ve escaped gas prices, you are stuck paying electric bills that depend on fossil fuels and infrastructure costs that are going up.”
Michigan Could Feel The Impact More Than Other States
Michigan’s economy has unique vulnerabilities that make rising costs particularly important.
The state’s tourism industry depends heavily on summer travel spending, while automakers and dealerships rely on consumers making major purchases such as new vehicles.
“Michigan is especially vulnerable,” Anderson said. “We depend on vacation spending in our tourism industry, and on big-ticket spending on cars. Both of these are affected.”
If consumers become more cautious because of higher gasoline, electricity and food costs, businesses ranging from hotels and restaurants to auto dealers and retailers could feel the impact.
Small Businesses Preparing For Tougher Times
The NFIB Small Business Optimism Index, a widely watched measure of how business owners view sales prospects, hiring plans, expansion opportunities and overall economic conditions, fell to 95.3 in May. While the decline was modest, the reading remains below the survey’s 52-year average of 98.0, indicating small business owners are generally less optimistic than normal about the economic outlook.
More troubling was the rise in the NFIB Uncertainty Index, which climbed to 91 in May. The index measures how uncertain business owners feel about future economic conditions, government policies, operating costs and customer demand. The long-term average is 68, meaning uncertainty is running roughly one-third higher than business owners typically report.
In simple terms, small business owners are becoming less confident and more nervous about what the economy will look like later this year.
Historically, elevated uncertainty tends to cause business owners to delay hiring, postpone investments, hold back expansion plans and become more cautious about spending. Those patterns are evident throughout the latest survey results.
More concerning was what business owners said about future spending plans.
Only 16 percent of owners said they plan to make capital investments during the next six months, the lowest level since March 2009 during the aftermath of the Great Recession.
At the same time, business owners reported the highest level of planned price increases since 2022.
The net percentage of owners planning to raise prices jumped seven points in May to 34 percent.
Eighteen percent identified inflation as their single biggest business problem, the highest level since late 2024.
Hiring Plans Hit Six-Year Low
The survey also suggests job seekers may face fewer opportunities in coming months.
Just 29 percent of owners reported job openings they could not fill, down five points from April and the lowest level since May 2020.
A seasonally adjusted net 9 percent of owners said they plan to create new jobs in the next three months, also the lowest level in six years.
While fewer employers reported trouble finding workers, labor costs continue to climb.
Fourteen percent of business owners identified labor costs as their most important challenge, the highest reading in the survey’s history.
Supply Chain Problems Return
Another warning sign emerged in supply chains.
Seventy percent of business owners reported supply-chain disruptions affected their business to some extent in May, up six points from April.
Most described the disruptions as mild or moderate, but the increase suggests businesses are once again encountering difficulties obtaining products and materials.
Combined with rising labor, fuel and electricity costs, those disruptions could add further pressure to consumer prices during the second half of the year.
Main Street Is Sending A Warning
Although artificial intelligence investments and large corporate spending continue generating excitement in some sectors of the economy, many small business owners appear to be bracing for a more difficult economic environment.
NFIB Michigan State Director Amanda Fisher said uncertainty continues to weigh heavily on employers.
“Small business owners are feeling uncertain about future business conditions and continue to make business adjustments to accommodate the ongoing rise in business costs,” Fisher said. “The tight labor market is a top concern for small employers, especially as finding qualified applicants remains a top challenge on Main Street.”
For Michigan consumers, the message from small businesses is straightforward: higher operating costs are increasingly making their way into the prices customers pay. As summer travel, air-conditioning bills and family spending rise, many households may soon feel the same economic pressures already affecting Main Street.
