Brian Wesbury, chief economist at First Trust Advisors, reacts to Fed Chairman Jerome Powell, saying he won’t resign if President-elect Trump asks him about “Making Money.”
The backbone of the U.S. economy — America’s small businesses — could be damaged beyond repair without serious intervention, a new study by private digital lender Biz2Credit shows.
The study data was drawn from more than 100,000 financing applications submitted to Biz2Credit between January 2022 and December 2024, and shows a sharp decline in small business profits towards the end of 2024, a trend the lender expects to continue. continue until 2025.
The study highlights concerns about the economy after four years of so-called President Biden’s policies that involve taxes and regulations on the business community while providing tax incentives to certain targeted industries that fit his progressive program. Despite strong GDP growth figures and low unemployment, issues such as inflation and regulatory costs have hit some segments of the economy harder than others.
INFLATION INCREASES BY 2.9% IN DECEMBER, IN LINE WITH EXPECTATIONS
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“Small business owners have been on a roller coaster ride in 2024. Profits increased through July and declined every month through December,” said Rohit Arora, managing director and co-founder of Biz2Credit. “Average monthly earnings fell nearly $68,000 from 2023 and were also lower than they were in 2022.”
The reason for this decline, according to Arora, is that smaller companies do not have the scale to spread costs across a large balance sheet and are hit harder by inflation, which, although slowed, has led to lower prices high for goods that have not yet increased. t.
The new Trump administration has pledged to ease regulations and taxes on small businesses to regain the growth lost during the Biden years.
“Trump was elected on the basis of his promise to fix the economy, and he says that will be a priority from day one,” Arora said. “Based on our data for the final months of 2024, the start of 2025 could be difficult for small businesses.”
Small business optimism hits six-year high after Trump win
President Donald Trump raises his fist after speaking in the East Room of the White House, Wednesday, Nov. 4, 2020, in Washington, as Vice President Mike Pence and first lady Melania Trump look on. (AP Photo/Evan Vucci)
The survey, for example, shows that small businesses suffered a 43% drop in profits in 2024. The average monthly income of surveyed businesses for the first 11 months of 2024 was $86,809, down from $150 $000 in 2023 – the worst annual average since 2020. A major problem for small businesses is the persistence of high prices. Business-related costs increased significantly, with average monthly expenses totaling $664,525, up from $364,292 the previous year.
Although the inflation rate has been on a downward trend since June 2022, when it reached a staggering 9.1% (Wednesday’s CPI report showed inflation reaching 2, 9% in December, up slightly from the previous month), overall costs for small businesses in the form of rent, insurance and labor remain high, and some are increasing.
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On a positive note, the National Federation of Independent Business (NFIB) released its latest Small Business Optimism Index on Tuesday, showing that optimism on the high street jumped 3.4 points to 105.1 in December. This is the highest figure since October 2018, as small business owners hope for improved economic conditions under Trump.