Small-business owners expect a tough 2023, even as inflation has subsided somewhat, the National Federation of Independent Business said on Tuesday.

The organization’s monthly Small Business Optimism index fell 2.1 points in December, to 89.8 compared to 91.9 in November.

As was the case a month earlier, inflation remained the top concern with nearly a third, or 32%, reporting it as such. However, at the same time, the percentage of business owners saying they were raising prices fell by 8 points.

“Overall, small business owners are not optimistic about 2023 as sales and business conditions are expected to deteriorate,” NFIB Chief Economist Bill Dunkelberg said. “Owners are managing several economic uncertainties and persistent inflation and they continue to make business and operational changes to compensate.”

Still more than half of those surveyed, or 55%, said they were trying to hire new employees in December, although 93% reported having few or no qualified applicants.

More than a quarter, or 27%, said they planned to raise their workers’ wages in the coming three months, a slight decline from November.

Altogether, the survey paints a picture of a difficult time for small businesses as they confront the twin challenges of high inflation and rising costs of borrowing, as the Federal Reserve continues to increase interest rates to combat inflation. Small businesses are often more exposed to higher borrowing costs as they rely more on banks and other lenders to finance their operations and lack the access to the capital markets that larger firms have.

The percentage of owners expecting better business conditions over the next six months fell by 8 points.

Separately, a survey of online spending found prices fell by 1.6% year over year in December, the fourth consecutive month of price declines. Prices for computers fell 16.2%, while other electronics saw price declines of 12%. Appliances were 2.1%, while toys fell 7.1%.

The declines reflect the changing environment of online shopping. After soaring during the coronavirus pandemic when many people were shut in, online shopping has returned to a more normal pattern and prices no longer remain elevated. Aggressive discounting during the holiday season also fueled price declines.