The Fed disagrees, but Main Street says ‘the recession is already here.’

Small business confidence has hit an all-time low as the majority of Main Street expects runaway inflation and a Federal Reserve that is unable to engineer a soft landing for the economy, leading to revenue declines and staffing cuts across sectors

According to the CNBC/SurveyMonkey Small Business Survey for Q3 2022, the majority of small business owners think the recession has begun, while another 14% think it will be over before the year is out.

A survey of 2,557 small business owners was conducted by CNBC and SurveyMonkey.

A survey shows that Main Street is more pessimistic than the general population. 45% of people think the U.S. economy has entered a recession.

The data from CNBC and SurveyMonkey is in line with other small business polls.

Holly Wade, executive director of research at the National Federation of Independent Business, said that the business outlook has deteriorated from the beginning of the year.

Inflation in input costs, energy prices and labor have been the top concerns for small business owners throughout the year. 42% of small business owners say inflation is the biggest risk to their business right now, up from 32% last quarter and the highest reading in the last four quarters.

Most don't see much end in sight or easing of the problem.

A majority of small business owners think prices will go up. While large corporations continue to pass along price increases to customers and report healthy profits, only a small percentage of small businesses think now is a good time to increase prices.

Higher input costs are passed along to the customer. They are not able to do that quickly. It is hurting cash flow and making it difficult to manage it.

A majority of small business owners don't think the Federal Reserve will be able to fight inflation.

The Fed has said that inflation is its top priority and that interest rates will keep increasing until prices are under control, but senior leadership including Chair Powell have said that the economy is not in a recession.

Right now, we are not in a recession. The president of the St. Louis Fed said that a recession is in the eye of the beholder.

The U.S. economy is proving to be resilient even though GDP has been negative for two straight quarters. Big box stores have been hit hard by shifting consumer behavior. The unemployment rate is low, the labor market is strong, and the macroeconomic data supports the belief that a recession may not happen. The ISM non-manufacturing purchasing managers index rebounded. The stock market just had its best month in years.

Small business sentiment is similar to consumer sentiment in that it tends to be reactionary rather than long-term forecasting, and that can result in sharper, shorter-term shifts in sentiment. According to the Small Business Survey, the current recession view on Main Street is different from the Fed view. There is more general reflection of the economic slowdown that the Fed is attempting to engineer in the details that make up the core confidence index.

SurveyMonkey says that the confidence indicator that looms largest this quarter is a weaker sales outlook on Main Street. As the Fed attempts to cool demand throughout the economy with higher interest rates, over one quarter of small business owners expect their revenue to decrease over the next 12 months, up from 21% last quarter. The confidence index hit an all-time low in the third quarter.

More small businesses are planning to cut staff over the next year.

The percentage of small business owners who say their business is good went down again. The number of small business owners saying the economy is poor has gone up.

A majority of people think higher interest rates will be bad for their business.

The confidence index score was lower in the third quarter. During the first quarter of the Biden Administration, the lowest score was 43.

According to Wade, many small business owners in the NFIB survey don't think the recession has started, but they are bracing for the economic downturn. She said that many people expect higher sales in the next quarter.

Employment and sales in small businesses are holding up.

The small business demographic skews conservative and the confidence index reflects some partisan sentiment. Republicans think the economy is in a recession at a higher rate than Democrats. The difference in how Republicans and Democrats describe the economy is even larger.

The percentage of small business owners who identify as Democrats is a problem for the president. More than half of Democrats agree with that figure, even though the partisan gap is wide.

34% of small business owners approve of how Biden has handled the job of president, which is the lowest approval level of his administration.

While 81% of small business owners who are Democrats approve of Biden, pollsters have found that presidents expect the vast majority of their party to support them. The CNBC/SurveyMonkey Small Business Survey shows that Biden's approval rating will not improve unless inflation goes down. Biden has approval among swing voters who identify as independent.

Biden has the approval of 9% of Republicans.