Main Street Trends: June 2026 Small Business Economic Outlook

Highlights:

• The pressure of rising costs is increasing for businesses; a 4.2% jump in May consumer prices is forcing small businesses to raise prices to protect margins despite softening sales expectations.

• Consumer spending remains resilient but is increasingly decoupled from real income growth, signaling potential sustainability risks for the second half of 2026.

The latest economic data shows a resilient, yet fragile, environment. 

The labor market remains strong, consumer spending has held up, and economic growth remains positive. At the same time, inflation is accelerating again, energy prices are rising, and pressure is building on both households and small businesses. View June’s Main Street Lending Report for the full picture and see our analysis below.¹ 

In April, the Small Business Lending Index increased 10.8% from the prior month but remains down 10.9% compared to one year ago. The monthly increase suggests some improvement in lending activity, though overall borrowing demand remains weaker than last year.

Credit performance continues to show only modest changes. Short-term delinquencies, defined as loans 31 to 90 days past due, increased slightly from 1.64% in February to 1.69% in April. Serious delinquencies, defined as loans 91 to 180 days past due, also moved slightly higher.

Overall, small business financial stress has not changed much over the past year. While defaults remain above pre-pandemic levels, current trends do not suggest broad financial deterioration across Main Street.

Even so, small business owners continue to operate in a challenging environment. Rising costs, elevated borrowing rates, and softer sales expectations are creating pressure on margins and long-term planning.

Recent economic data points to a resilient economy. In May, the U.S. added 172,000 jobs, bringing total job gains over the last three months to 565,000. This marker indicates a sharp improvement from the prior three-month period, which showed a net loss of 13,000 jobs.

Economic growth has also remained positive. Gross domestic product (GDP) grew at a 1.6% annualized rate in the first quarter, showing that the economy has continued expanding despite recent headwinds.

Moreover, consumer spending has continued to be relatively steady. Spending grew 2.1% year-over-year in April and 5.1% year over year in May, according to Bank of America.²

On the surface, these numbers suggest adaptability. However, conditions beneath the surface are becoming more complicated.

Inflation jumped again in May, with consumer prices rising 4.2% year-over-year. Rising energy prices accounted for more than 60% of the monthly increase, driven largely by continued global conflict.

While inflation today is more concentrated than the broad-based surge seen in 2022, the risk of price increases spreading across the economy is growing.

Early signs of that spillover are already appearing. For example, plastic and resin prices rose 14% year-over-year in May. Because these materials are widely used in food packaging and consumer goods, higher costs could soon push grocery and retail prices higher as well.

For small businesses, these rising prices are becoming harder to ignore. The share of owners reporting price increases over the past three months has reached its highest level since early 2023.

This data point suggests many businesses are raising prices to protect margins. However, they are doing so in a weaker demand environment. Sales expectations among small business owners have fallen sharply, dropping from a net 16% at the start of the year to just 1% today.

This gap matters. Businesses are not raising prices because demand is strong. They are raising prices because costs are rising.

Consumer spending has remained surprisingly strong, but questions are growing about how sustainable that trend may be.

Real disposable personal income turned negative on an annual basis for the first time since December 2022. In simple terms, after adjusting for increased prices, households are bringing home less purchasing power.

Even more concerning, real disposable income growth has trailed consumer spending growth in 11 of the last 12 months.

That imbalance usually cannot last forever.

The personal savings rate has also fallen sharply, dropping from 5.5% to just 2.6%, one of the lowest levels on record. At the same time, revolving credit card debt has climbed to record highs, suggesting many consumers may be relying more heavily on borrowing to maintain spending.

There are several possible reasons spending has remained strong despite weaker income growth. Wealth gains from the stock market may be supporting higher income households, while some households may still be benefiting from wage gains earned during 2022 and 2023. Still, this pattern raises concerns.

If income growth does not improve, consumer spending could begin to slow in the second half of 2026. That scenario would create additional pressure for small businesses, especially those tied to discretionary spending.

Main Street now faces two major risks. First, higher prices are putting renewed pressure on margins and forcing difficult pricing decisions. Second, consumer spending appears increasingly disconnected from income growth, raising concerns about whether demand can remain strong.

The current environment remains stable, but growing imbalances are worth watching closely.

The economy continues to show resilience, but warning signs are becoming harder to ignore. Job growth remains strong and consumer spending has held up, helping support overall economic activity.

At the same time, inflation is accelerating again, driven largely by rising energy prices and geopolitical tensions. Small businesses are responding by raising prices, even as confidence in future sales weakens.

Consumer demand remains the biggest question for the months ahead. Spending has stayed strong, but falling real income, lower savings, and rising credit card debt suggest households may be under growing financial pressure.

For Main Street, the environment remains manageable but increasingly fragile. Staying disciplined on expenses, monitoring cash flow, and preparing for shifts in consumer behavior will remain critical through the second half of 2026.

Keep Your Business Goals Within Sight

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Source:

1. Equifax, June 2026 Main Street Lending Report

2. Bank of America, June 2026 Consumer Checkpoint