US small business owners' confidence slumped to its lowest level in 11 years in March amid escalating inflationary pressures and sluggish sales expectations, according to the National Federation of Independent Business.

The small business optimism index dropped to 88.5, hitting its lowest since December 2012, per NFIB's latest report. It's been below the 50-year average of 98 for 27 straight months. 

NFIB Chief Economist Bill Dunkelberg said in a statement that "owners continue to manage numerous economic headwinds," adding that inflation is again the top concern for business owners, while tight labor market conditions also remain a challenge. 

Delving deeper, 25% of owners pointed to inflation as their top hurdle, an increase of two percentage points from February's reading. Moreover, the share of owners that said they're hiking average prices jumped to 28%.

As the Federal Reserve maintains high interest rates to combat inflation and Wall Street adjusts expectations for a June rate cut, 8% of small business owners are feeling the pinch, saying that they're finding it harder to secure loans for their business.

Despite the latest drop in the unemployment rate to 3.8%, 37% of owners reported unfilled job openings, matching February's level—the lowest since January 2021. Transportation, construction, and services sectors are grappling with major staffing challenges, the report indicates. 

Wall Street guru Mohamed El-Erian has echoed small business owners' concerns, seeing the drop in confidence as a sign of a looming slowdown of the US economy.

"The big mistake that was made in 2021 when people embraced the transitory narrative was they didn't listen to the companies, and the companies were clearly saying, we have inflationary pressures in the pipeline, we have pricing power, we're going to pass on that imported inflation that was coming in," he said during an interview with Bloomberg TV on Tuesday.