CLEVELAND — The U.S. Bureau of Labor Statistics will be releasing its newest inflation data Tuesday, and many experts anticipate the Consumer Price Index will show a slowdown in price increases in the month of August. Although that would be viewed as welcome news after inflation set new records over the summer, the higher costs of running their small businesses have many owners settling in for the long haul.
Tuesday’s consumer price index data will set the stage for another important meeting of the Federal Reserve on Sept. 20, where the central bank is expected to announce another interest rate hike of 0.75 percent, the third consecutive increase of its kind.
The surging inflation rate over the past several months has been fueled by substantial increases to food and energy costs, both of which have been felt by Nick Semertsidis, the owner of Gus’s Old Brooklyn, a longtime restaurant in Cleveland’s Old Brooklyn neighborhood. What started as small increases for items like eggs, potatoes and milk, have in some cases turned into triple-digit increases.
“Business has improved and it’s been really good. The neighborhood has been great. But the price of everything has gone up even more,” Semertsidis said. “It’s hard when you’re trying to be competitive and it’s hard to keep the prices down for the customers, you know? It makes it really hard for little places like this where that is your main staple.”
Semertsidis said a 50 lbs. bag of potatoes cost him $14 to $18 at one time. However, that same bag now costs well over $40. The same has held true for eggs — a staple in his all-day breakfast offering — which are now more than $40 per case.
“With the food cost going up, your margins are really slim. It’s hard to do,” Semertsidis said.
Small businesses in need of capital to grow or re-tool their businesses are also feeling the bind. Consecutive increases to interest rates have made borrowing substantially more expensive. Consumers aren’t immune either.
“Those of us that have credit card debt know that very well. The price of borrowing is higher in a higher interest rate environment. It is more expensive for small business owners to access capital,” said Michael Goldberg, the executive director of the Veale Institute for Entrepreneurship at Case Western Reserve University. “The impact of inflation is felt by all of us. Specifically, as we think about the impact on a small business owner, the price of their goods have gone up because energy prices have gone up. The cost of transporting goods has gone up. The price of raw materials have gone up.”
The inflationary environment that small business owners like Semertsidis are facing presents a difficult choice between undesirable options: “eat” the added cost, increase prices or offer less at the same price.
While some menu items have had price increases, Semertsidis has taken a different approach.
“If our price does go up, I’m going to not look at cutting the quality just because of the cost. I’m going to bring it up to a better quality and give [customers] more to justify the price increase,” Semertsidis said. “But with the food cost going up, our margins are really slim and it’s hard to do.”
