News

The NFIB Small Business Optimism Index dropped 2 points to 98.8 in September, remaining slightly above the 52-year average of 98. September’s decrease was due primarily to a decline in the share of small business owners expecting better business conditions and an increase in reports of excess inventory. Of the 10 components included in the index, two increased, five decreased and three stayed the same. Meanwhile, the Uncertainty Index rose 7 points to 100, the fourth-highest reading in over 51 years and well above the 51-year average (68) and the average since 2016 (80).

Labor quality and taxes tied as the top concern for small business owners, with 18% reporting each as the most important problem. Business owners continue to struggle to fill positions despite openings trending down, with 32% of small business owners reporting jobs they could not fill in September, unchanged from August. The share of small business owners in September reporting taxes as a top problem increased 1% from August, with some noting high property taxes in particular. Meanwhile, inflation ranked third in the list of concerns, with 14% reporting it as a top problem, up 3 points from August. Looking forward, a net 31% plan to increase prices in anticipation of rising tariff costs, up 5 points from August.

A net 31% of small business owners reported raising compensation, up 2 points in September after increasing 2 points in August. Meanwhile, 19% of business owners plan to raise compensation in the next three months, down 1 point from August. Pressure on profitability continued to ease, improving 3 points from August to a net negative 16%. Among owners reporting lower profits, 33% blamed weaker sales, 17% cited increased material costs, 10% noted price changes for their product(s) or services(s) and 9% said labor costs. Meanwhile, 7% reported their last loan was harder to get than previous attempts, up 4 points from August, and a net 7% of owners cited paying a higher rate on their most recent loan, up 1 point from the prior month.

The outlook for general business conditions fell 11 points to 23%, still a positive read by historical standards. Additionally, 11% reported that it is a good time to expand their business, down 3 points from August, a rather weak read compared to times of economic expansion. Overall, small business owners remain relatively optimistic, but uncertainty remains very high.