Small businesses feel pinch
A report from Arizona shows small businesses are getting squeezed by rising costs and more cautious customers, with economists noting consumer spending drives much of the U.S. economy. The trend suggests local shops and eateries may increase promotions to keep customers as households tighten discretionary spending. (abc15.com)
Arizona shop and restaurant owners are paying more to operate just as customers pull back on extras like dining out and impulse buys. (abc15.com) ABC15 reported from Mesa on April 10 that local owners are facing a two-sided squeeze: higher business costs and slower customer traffic. Economist Lee McPheters told the station consumer spending drives roughly 75% of the United States economy. (abc15.com) Federal data puts the consumer share a little lower but still dominant. Personal consumption expenditures accounted for 68.0% of United States gross domestic product in the fourth quarter of 2025, according to the Federal Reserve Bank of St. Louis data series based on Bureau of Economic Analysis figures. (fred.stlouisfed.org) That matters in a slower economy. The Bureau of Economic Analysis said on April 9 that real gross domestic product grew at a 0.5% annual rate in the fourth quarter of 2025, down from 4.4% in the third quarter, while February 2026 personal consumption expenditures still rose 0.5% from the prior month. (bea.gov) For small businesses, that mix usually means households are still spending but becoming choosier about where. Stores and eateries cannot easily absorb higher wages, supplies, rent, and card-processing fees if customers start skipping nonessential purchases. (abc15.com); (azcapitoltimes.com) National small-business surveys show the same tension. The National Federation of Independent Business said its Small Business Optimism Index for February 2026 slipped to 98.8 from 99.3 in January, while a net 24% of owners raised average selling prices and a net 34% raised compensation. (nfib.com) The same survey said 59% of owners reported supply-chain disruptions affecting their business to some extent, and 8% said competition from large businesses was their single most important problem, the highest share since May 2021. (nfib.com) Arizona merchants are already talking about the next response: more specials, discounts, and promotions to keep customers coming in. If costs keep rising faster than traffic recovers, the pressure lands first on margins and then on hiring, hours, and expansion plans. (abc15.com); (nfib.com)
