By Sean Hemmersmeier, Las Vegas Review-Journal, April 13, 2023
A year of high inflation and rising interest rates have created a gloomy economic outlook for Nevada businesses, according to a survey from Nevada State Bank.
The survey found 54.9 percent of businesses expect inflation to increase by the end of 2023 and 67.3 percent expect interest rates to continue to climb this year. Only 19.1 percent of respondents expect inflation to decrease and 10.1 percent expect interest rates to go down. The report, conducted by Las Vegas-based Applied Analysis, surveyed 400 businesses.
“(Small businesses) see a lot of Nevadans. They see a lot of customers. They’re really the ones on the ground, and the first people to really indicate signs of opportunity or signs of decline,” said Megan Comfort, senior vice president and small business manager at NSB. “(Economic outlook) doesn’t seem as optimistic (as) maybe it did last year, and it might be because of the interest rates and just the cost of core things going up.”
The Federal Reserve raised interest rates last month by 25 basis points — it’s ninth consecutive rate hike since March 2022. And government data released Wednesday showed consumer prices rose just 0.1 percent from February to March, and measured from a year earlier, prices were up 5 percent in March, down from February’s 6 percent year-over-year increase.
While prices appear to be easing, it still remains high and Nevada businesses are feeling the pinch as customers spend less at a time when business costs such as supplies are rising.
“We are definitely paying more attention to the quality of our products and then the customer feedback to be more specific about what we’re spending our money on,” Alexzandria Yardley, store manager at Paige and Rye in Downtown Summerlin, said. “We do see more sales in products that are mid-priced than the ones that are higher priced.”
Friendly Hobbies operates a location in Las Vegas and Henderson, selling radio-controlled cars, drones and 3D printers. The business has seen a downturn in recent months after having a “wonderful” amount of business during the pandemic, as people had their savings boosted by federal stimulus programs, according to Bryan Ward, vice president at Friendly Hobbies.
“Since the economy has kind of had a downturn, people really think about where and when and how they’re going to spend their money,” Ward said.
The hobby store has needed to focus more on advertising and sales to get people into its locations, according to Ward.
This higher level of scrutiny in customers has limited businesses’ ability for growth since 41.4 percent of respondents said their profits have stayed the same over the last year while only 30.5 percent of respondents said their profits have increased. Some reasons why only one-third of respondents saw an increase in profits could be because 73.4 percent experienced supply chain challenges and 49.1 percent of respondents said they needed to increase their prices because of inflation.
Good Wolf Clothing Lifestyle Co. in downtown Las Vegas said its vendors have increased costs forcing the boutique to raise prices, according to co-owner Sean Blanchard.
“We kept our margins, right where the vendors kept their margins,” he said. “We never increased our prices just because.”
Businesses in Nevada weren’t optimistic about the national economy with 65.3 percent of respondents saying it is moving in the wrong direction. But there was a better outlook on Nevada’s economy as 53.8 percent of respondents said it was moving in the right direction.
Blanchard said Good Wolf has had its best few months recently, despite having to raise prices, and Las Vegas still feels like a solid market for his business.
“There’s probably over 2 million people that live here, and I think we haven’t scratched the surface yet,” Blanchard said.