Impact on Black and minority firms of the September 2025 PCE price index. (Released on December 5, 2025)
The BEA’s December 5 2025 release reports the following for September:
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Personal income rose 0.4% vs August; disposable personal income (after taxes) rose 0.3%.
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Consumers spent more: current-dollar personal consumption expenditures (PCE) increased 0.3%. But “real” PCE (adjusted for inflation) was essentially flat.
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The PCE Price Index — the broad inflation gauge for consumer goods and services — increased 0.3% month-over-month.
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On a 12-month basis, the PCE Price Index rose 2.8%.
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Excluding volatile food and energy categories (the “core” measure), prices also rose 0.2% month-over-month and about 2.8% year-over-year.
In short: while incomes and nominal spending ticked up, inflation remains noticeable — pushing up costs for households and consumers.
Inflation + Income: What That Means for Black & Minority-Owned Firms
Because inflation directly affects the cost of goods, inputs, and consumers’ purchasing power, the rising PCE index has important implications for smaller firms — especially those owned by historically disadvantaged groups. Combining the BEA data with what we know about structural disparities gives a mixed picture: limited opportunities alongside real risks.
🔹 Downward Pressure on Real Consumer Demand
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Although consumer spending rose in nominal terms, “real PCE” didn’t meaningfully increase. That signals that much of the increase in spending simply reflects higher prices, not more volume or additional consumption. For small businesses — especially minority-owned ones that often depend on modest-volume, community-based consumption — this can be a warning sign.
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For households, inflation erodes purchasing power. Research shows that high inflation disproportionately squeezes low- and moderate-income households — groups that include many Black and Hispanic families. (Federal Reserve Bank of Dallas)
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As consumer budgets tighten (especially if wages don’t keep pace with inflation), discretionary spending tends to be cut first. Minority-owned firms that depend on discretionary services or non-essential goods may thus see demand soften even if headline “spending” numbers look decent.
🔹 Rising Costs for Businesses — Inputs, Supplies, Operating Expenses
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The rise in the PCE Price Index means that the cost of goods and services across the economy is rising. For small businesses that purchase inventory, supplies, or pay for services (rent, utilities, materials), rising input costs can squeeze margins.
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Minority-owned small businesses are often more vulnerable to margin pressure because they may have less access to capital, limited cash reserves, and weaker banking or credit relationships. (Urban Institute)
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Higher operating costs without corresponding ability to raise prices (because customers are price-sensitive) creates a tough squeeze — especially for firms already operating on thin margins.
🔹 A Strain on the “Wealth Gap” and Long-Term Growth Potential
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For Black and minority entrepreneurs, small business ownership has long been considered a key pathway toward building wealth, narrowing the racial wealth gap, and anchoring capital within communities.
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But persistent inflation undermines those gains: fewer profits, less reinvestment, less ability to expand or weather economic swings — all of which can stall growth or even force closures.
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Without targeted structural supports — such as equitable access to financing, grants or subsidies to offset cost pressures, business-support programs — the modest macroeconomic “growth” in income and spending may not translate into stronger, sustainable growth for minority-owned firms.
Why Inflation Matters More for Minority Businesses Than Macro Data Suggests
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Vulnerability to Cost Shocks. Small and minority-owned businesses typically have less cushion to absorb rising input costs than larger firms; even small upticks in prices can erode profitability severely.
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Customer Base Under Pressure. Many minority-owned firms rely on low- to moderate-income communities. Inflation-induced stress on those households reduces discretionary spending — shrinking demand for small-business services and goods.
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Structural Inequities in Capital Access. Because of documented disparities in financing and credit access, minority-owned firms are less likely to raise capital to offset inflation pressures or invest in efficiency improvements.
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Wealth & Growth Gap Risks. Continued inflation without growth in real income or targeted support can deepen the racial wealth gap: those with fewer resources may fall further behind, both as consumers and as business owners.
What This Suggests for Advocates, Policymakers & Community Supporters
To help minority-owned firms survive — and thrive — in an inflationary but income-growth environment, it may be critical to:
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Track and collect disaggregated data — report not just macro PCE and income changes, but how those translate into real outcomes (revenues, profits, survival) for Black- and minority-owned firms.
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Facilitate equitable access to affordable capital — through low-interest loans, grants, or community investment funds — to cushion cost pressures and support scaling.
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Support community-based demand stimulation — e.g., “buy local / buy Black” campaigns; local procurement policies; consumer education — to help increase demand resilience among minority-owned firms.
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Provide technical assistance and capacity-building — helping small firms navigate cost inflation: negotiating better supply deals, improving efficiency, diversifying revenue streams, or shifting toward higher-margin offerings.
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Advocate for policy interventions — rent/utility relief, grants for rising costs, subsidies for supplies or input goods — especially for firms in historically undercapitalized communities.
Conclusion
The September 2025 BEA data — rising incomes, rising consumer spending, but also rising prices — offers a nuanced, cautionary tale for minority-owned small businesses. On paper, some conditions look favorable: households have a bit more income, spending ticks up. But inflation — as measured by the PCE Price Index — eats into real purchasing power and puts pressure on both consumers and business owners.
For too many Black and minority-owned firms, that means the possibility of shrinking margins, dampened demand, and slowed growth — unless structural supports and equity-driven policies are deployed now.
We’re at a crossroads: macroeconomic aggregates may hide the disparate realities on the ground. The path forward requires more than data — it requires skill and an intention to protect the public interest, two factors the current administration has shown to be in short supply.