NEW YORK — While many costs have come down for small businesses, rents remain high and in some cases are still rising, forcing many owners into some uncomfortable decisions.

“Every time the rent goes up, we have to raise prices, to keep up with the cost,” said Adelita Valentine, owner of HairFreek Barbers in Los Angeles. “But with the cost of living, it makes it difficult on our customers.”

Other owners are choosing to be late on payments or seeking out new locations where the rent is lower. A few are pushing back against their landlord.

Although inflation is easing, it remains a top concern for small businesses. According to Bank of America internal data, rent payments per small business client rose 11% year-over-year in July. That’s more than twice the increase for renting and owning a residence, a metric known as shelter, according to the government’s monthly Consumer Price Index. That figure rose 5.1% in July.

And although the situation has improved since the height of the pandemic, a survey by business networking platform Alignable of more than 6,000 small business owners found that 41% could not pay their July rent on time and in full. And 52% said they’ve encountered rent spikes in the past six months.

The rent for Valentine’s barbershop rose to $4,000 in January from $3,600 in December, the fifth increase in the past eight years. She had to raise the price for her cuts from $35 to $40.

Two months ago, she moved locations for a cheaper $3,200 rent, but her space is smaller now and she sees fewer families coming in.

“A lot of people can’t afford to take a whole family to get haircuts,” after the price increase, she said.

Peter Yu has owned iPAC Automotive, an auto repair and detailing shop in Ontario, Canada, for six years. He said the rent on the shop typically went up about 4% a year. But when his landlord sold the property to a new owner, Yu’s rent jumped from about $1,800 (2,500 Canadian dollars) to about $2,700 (3,700 Canadian dollars) after three months.

He contemplated moving but decided that the cost of a move would be more than just paying the extra rent.

Yu tried to raise prices a month ago, but customers would come in and say “Oh, its too expensive,” and leave, he said. So, he had to drop the price increase in order to get those customers back.

“When we do try to raise our prices, consumers don’t have the money to pay for it. They’re looking for financing options,” he said. Yu’s services run the gamut from paint correction that costs a few hundred dollars to troubleshooting problematic EV battery and electric drive units for out-of-warranty Teslas that can cost up to $15,000.

So instead, he’s going to try to improve his marketing, close more sales, and find a way to offer more financing.

Standing firm against a landlord sometimes works. Janna Rodriguez has run her home-based The Innovative Daycare Corp. in Freeport, New York, since 2018. When she first signed her lease, she paid $3,500, plus costs including landscaping and maintenance. In 2020, the pandemic began, and her landlord raised her rent to $3,800 and also made her start paying half of the homeowner’s insurance. Last year, the landlord raised her rent to $4,100, plus the additional expenses.

Rodriguez raised her prices for the first time, by $10 per child per week, to help offset the rising rent.

This year she successfully pushed back when the landlord wanted to raise the rent yet again.

“I said to them, if you do that, then I’m going to find another property to move my business to, because at this point now you’re trying to bankrupt a business, right?” 

It’s worked – so far. But Rodriguez is worried about the future.

For others, negotiating a late payment is an option. Nicole Pomije owner of Minneapolis-based The Cookie Cups, which makes cookie kits for kids, has a 372-square-meter office space along with a warehouse where she develops her line of baking kits. Her rent rose 10% this year to $4,000 monthly. Then there are unanticipated bills, such as $1,500 for snow plowing.

“There’s so much stuff that pops up that you just you never expect,” she said. “And it’s always when you never expect it.”

Pomije hasn’t raised prices, but instead tried to mitigate the higher rent costs by buying materials in bulk – like ordering 5,000 boxes instead of 1,000 boxes for a 40% discount — and finding cost savings elsewhere.

Still, there have been several months over the past couple of years where she couldn’t pay rent on time. So, far the landlord has been amenable.

“If we have a conversation like hey, we don’t know if we’re going to make it for the first this month. It might be closer to the tenth,” she said.

Asked if she thinks costs might ease in the future, Pomije said she is focused on the present.

“It’s weird, but I’m trying not to think about the future too much and I’m trying to just do what we have to do, and get ready for a holiday season and just, like, get everything paid on time now,” she said. “And then we’ll kind of reevaluate everything in January.”
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FRANKFURT/TALLINN — Inflation in the euro zone fell to its lowest level in three years in August, setting the stage for a further cut in the European Central Bank’s interest rates next month despite an Olympics-driven surge in the price of services.

The ECB has started winding down a two-year campaign against high inflation that followed the brisk reopening of the economy after the COVID-19 pandemic and Russia’s invasion of Ukraine.

Inflation in the 20 countries sharing the euro currency fell to 2.2% this month, the slowest pace since July 2021 and closing in on the ECB’s 2% target, according to a flash reading by the European Union statistics office, Eurostat.

While the fall was mostly driven by lower energy prices and may even reverse later this year, it was still likely to seal the deal on a second ECB rate cut on Sept 12 after a first move in June.

“The significant drop in headline inflation in August makes the September cut a foregone conclusion,” said Tomas Dvorak, a senior economist at Oxford Economics.

Even ECB board member and prominent policy ‘hawk’ Isabel Schnabel appeared to open the door to more easing on Friday, saying further gradual rate cuts might not derail the disinflation process as some policymakers had feared.

Still, the report showed price growth in the services sector – which is closely watched by policymakers because it better reflects domestic demand rather than external conditions – accelerated to 4.2% from an already high 4.0%.

This was the probable result of a boost from the Olympic Games in Paris, but also greater spending power by workers after some recent pay increases.

“This likely reflects a relatively tight job market, as the decrease in the unemployment rate in July shows,” said Gian Luigi Mandruzzato, senior economist at EFG Asset Management.

For now, markets see about six rate cuts before the end of next year, roughly one more cut than is baked into the ECB’s own economic projections, indicating that markets are more optimistic about the price outlook than the ECB.

This is partly because market economists see a bigger dip than the ECB’s own staff in inflation this autumn.

Policymakers say they will not be confident in the inflation outlook until wage growth slows, with Germany’s central bank especially vocal about this risk.

Still, with inflation now within a whisker of the ECB’s target, the euro zone’s central bankers were likely to broaden their debate from the single-minded focus on inflation to take into account signs of economic weakness.

Wage growth has slowed sharply and unemployment is already rising in around a quarter of the euro zone’s 20 countries. Survey data among firms and households suggest there is further labour market deterioration in store.

Lending has dwindled to a trickle since the ECB jacked up rates last year, causing investment to dry up and hampering sectors that rely on it, such as construction and manufacturing.

This has left euro zone economic growth barely humming along for over a year, with weakness in industrial powerhouse Germany only partly offset by strength in services-oriented countries such as Spain.

“We think the ECB is already behind the curve, fixated too much on current and narrow measures of inflation while not paying enough attention to weak growth, with potential long-term damaging impacts,” Oxford Economics’ Dvorak said.
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За словами Олексія Чернишова, ключова тема – співпраця для «зміцнення спільної енергетичної безпеки в умовах сучасних викликів»
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Washington — The U.S. economy expanded more than initially estimated in the second quarter this year, the Department of Commerce said Thursday, on stronger consumer spending than originally anticipated.

The world’s biggest economy grew at an annual rate of 3.0% in the April-to-June period, up from 2.8% according to an earlier estimate.

Analysts had expected no revision to the figure.

“The update primarily reflected an upward revision to consumer spending,” the Commerce Department said.

Unexpectedly robust consumption — even in the face of high interest rates — has helped to bolster the U.S. economy in recent times. But with households depleting pandemic-era savings, the anticipation was for consumption to pull back.

In the latest revision, the higher spending was partly offset by downward revisions in areas such as business investment, exports and government spending.

Imports, however, were revised higher.

The 3.0% figure for the second quarter this year was an uptick from 1.4% growth in the first quarter.

The Federal Reserve rapidly increased interest rates to tackle surging inflation in 2022. It is widely expected to make its first post-pandemic rate cut in September. This could provide a boost to the economy.
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