Key takeaways
• Gasoline spending per small business client surged 23% year-over-year (YoY) in March, with higher fuel costs spilling over into
freight, fertilizer, and inventory expenses. The pressure is especially pronounced in agriculture and transportation, while small
wholesalers are also grappling with inventory cost increases exceeding 60% YoY alongside ongoing tariff headwinds, according
to Bank of America payments data.
• Small business payroll growth turned negative for the third straight month, signaling that owners are pulling back on headcount
amid cost uncertainty. At the same time, small business payments to hiring firms have finally turned positive, with construction
and manufacturing hiring nearly 40% above the 2023 average.
• Small business balance sheets look stable, and small business profitability growth among these companies was positive in the
first quarter, according to Bank of America account data. But with more small businesses choosing not to seek external
financing and overall payments growth hovering around 1% YoY in March, in our view, such firms are prioritizing flexibility over
expansion for now.
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Small businesses impacted by the oil shock
Bank of America aggregated credit and debit card data shows gasoline spending per small business client rose 23% year-overyear (YoY) in March – the strongest increase in several years – after declining over the previous two months (Exhibit 1).
Certain sectors such as agriculture and transportation saw even greater growth as they are more likely to experience more acute pain at the pump, with gas spending growth up more than 25% YoY in March. And according to the National Federation of Independent Business (NFIB), the Small Business Uncertainty Index rose 4 points from February to 92 in March – well above its historical average of 68 – as a mix of inflationary pressures and geopolitics disrupt revenue expectations.
Transportation, agriculture and construction most exposed
Beyond direct fuel expenses, higher gasoline prices are feeding into broader cost structures, therefore raising transportation, input and inventory costs for many small businesses. Exhibit 2 shows that small businesses in transportation, agriculture and construction devote a noticeably larger share of their total credit and debit card spending to gasoline than other sectors. Because these industries rely heavily on vehicles and equipment, fuel is a core operating expense rather than a marginal cost. In fact, according to Bank of America small business account data, in March, both small transportation and agriculture firms saw a 0.4% increase in the share of gasoline expenditures relative to inflows (i.e. revenue) – this is double that of construction and quadruple that of other sectors.
More than just oil – local farmers face fertilizer costs and other constraints
Agricultural businesses are particularly exposed to disruptions from the war in the Middle East given commodities are traded globally, making transportation costs a large component of final prices, according to BofA Global Research. This creates a direct – and rapid – pass‑through from energy shocks to commodity prices. Since Operation Epic Fury (which began on February 28th) and its impact on energy prices, freight costs in the U.S.have surged nearly 50% for trucks and about 11-17% for ocean transportation.
Additionally, the blockage of the Strait of Hormuz is expected to further increase costs for farmers as this leads to fertilizer supply restrictions. In Bank of America small business payments data, small business deposit growth for agricultural businesses is taking a hit at a faster rate than overall deposit growth for this cohort.