Report: Small Business Inflation Fears Climb

Renewed concerns about inflation are weighing on small businesses’ economic outlook and tempering hiring and investment plans according to a new report.

The U.S. Chamber of Commerce’s Small Business Index Q2 2026, found that inflation is the top challenge for 57% of small businesses, up four points from last quarter and nine points higher than last year.

Based on an Ipsos survey of 751 small business owners, the index measured 66.5 for the second quarter, essentially flat compared with last quarter (67) and a modest improvement over the 65.2 for the second quarter of 2025.

Almost seven in 10 small businesses (69%) reported that their business is in good health, matching last quarter’s reading and edging up slightly from 68% a year ago.

Two-thirds (66%) expect revenue to grow over the next year, up from 61% in the first quarter.

Plans to add staff also ticked higher, with 35% intending to increase headcount, up from 30% last quarter.

Economic Outlook

However, the report points to a widening gap between how owners view their own businesses and how they view the broader economy—and inflation is a major factor.

Positive views of local economic conditions fell sharply, with only 33% of owners rating their local economy as good, down eight percentage points from 41% a year ago.

National economy ratings held closer to flat, with 30% calling it good versus 34% last year.

That erosion in confidence about the surrounding economy is showing up most clearly in investment plans, which have not kept pace with the modest gains in hiring and revenue expectations.

Only 38% of owners said they plan to increase investment in the coming year, nearly 10 percentage points below the 47% recorded in the second quarter of 2025.

Cash flow comfort has also softened, and more businesses this quarter said their compliance burden is rising—37% spent more time or resources on regulatory compliance, up from 29% in the first quarter.

Connecticut Challenges

The chamber’s national findings on inflation and investment hesitancy track closely with the challenges faced by Connecticut small businesses.

Connecticut remains one of the costliest states in the country to run a business, driven by high labor, energy, and regulatory compliance costs.

Connecticut remains one of the costliest states in the country to run a business.

The chamber’s regional breakdowns historically show Northeastern small businesses reporting business health and cash-flow comfort in line with the national average, even when their views of the broader economy diverge from other regions.

That pattern suggests Connecticut owners may be experiencing the same split highlighted nationally this quarter: confidence in their own operations, paired with caution about the environment around them.

Small businesses are still willing to hire and expect revenue to grow, but rising compliance burdens and persistent inflation concerns are visibly denting their appetite to invest.