Inflation poses new challenge for pandemic-weary businesses

NEW YORK (AP) — Small businesses that endured shutdowns and lower revenue during the COVID-19 outbreak now must contend with another crisis: spiking prices for goods and services that squeeze profits and force many owners to pass the increases along to customers.

Mickey Luongo’s company, Total Home Supply, is paying as much as 15% more than it paid pre-pandemic for the air conditioning and heating equipment it sells to other businesses and consumers. His suppliers have raised their prices because they’re paying more for raw materials, components and shipping. Luongo says some of his customers have pushed back on higher prices.

“We had one contractor who totally understood the price increase and was OK with it while other consumers get mad at us and think the increases are our fault,” says Luongo, co-owner of the Fairfield, New Jersey-based company.

Surging demand from consumers for a wide range of products during the pandemic has driven up prices for finished goods as well as raw materials, supplies and equipment. Product shortages and bottlenecks in supply chains have added to the costs.

Prices for materials and components used in construction spiked 4% in May from April and were up over 17% from a year earlier, according to the Labor Department. Manufacturers paid 2% more last month for materials than they did in April and 21% more than in May 2020. Also in the mix: intense competition for workers that has some companies paying more to attract new hires and retain current staffers.

While inflation affects all companies, small businesses struggle more than their larger counterparts. Big corporations have greater negotiating power because they buy goods and services in bulk and have much larger revenue streams to absorb higher costs. These factors make it easier for...