Small businesses are facing ongoing challenges due to rising costs, with rent inflation being a significant issue, states new data from the Bank of America Institute. The data reveals that the average monthly share of rent in total payments as of May has risen to 9.1%, a considerable increase from the 2019 average of 5.9%. Certain regions, like Las Vegas, are experiencing even higher rent burdens, with the average share of rent in May surpassing double the national average.
Despite these pressures, small businesses have found relief in stabilizing wage inflation. The Bank of America Institute highlights that total nonfarm payroll growth is strongest in the South, with cities such as Charlotte and Tampa witnessing payroll payments that are more than 30% higher than in 2019. The Institute conducted its analysis by examining internal data from small businesses that make rent payments through their Bank of America accounts.
Furthermore, the average monthly rent payment growth per small business client saw a 12% increase year-over-year in May. This growth aligns closely with the nonresidential real estate rents component of the Producer Price Index, indicating that the surge is primarily due to inflation rather than businesses upgrading to larger spaces. Another positive indication from the internal data is the rise in the inflow-to-outflow ratio, considered a measure of profits by the Bank of America Institute. The ratio saw an increase in May, reaching its highest level since March 2023, although it still lags behind the levels seen in previous years.
