News

The NFIB Small Business Optimism Index stepped up 0.5 points to 100.8 in August, remaining above the 52-year average of 98. August’s increase stemmed primarily from a rise in those expecting real sales to be higher. Of the 10 components included in the index, four increased, four decreased and two stayed the same. Meanwhile, the Uncertainty Index fell four points to 93, due to a decrease in uncertainty about financing conditions and planned capital expenditures. Nonetheless, the Uncertainty Index remained well above the 51-year average (68) and the average since 2016 (80).

Labor quality ranked first in the list of concerns for small business owners again in August, with 21% reporting it as the most important problem, the same percentage as July. The challenge of filling open positions remains acute, particularly in manufacturing, construction and transportation. On the other hand, fewer small business owners reported jobs they could not fill in August, down one point to 32% in August.

Taxes remained the second top problem for small business owners in August, with 17% reporting them as their most important problem, unchanged from July. Meanwhile, inflation ranked third in the list of concerns, with 11% reporting it as a top problem. Price increases remain above average, suggesting continued inflationary pressure and that tariffs may be starting to impact pricing.

A net 29% of small business owners reported raising compensation, up two points in August after decreasing six points in July. Meanwhile, 20% of business owners plan to raise compensation in the next three months, up three points from July. Pressure on profitability eased slightly, improving three points from July to a net negative 19%. Among owners reporting lower profits, 37% blamed weaker sales, 18% cited increased material costs, 10% noted price change for their product(s) or service(s) and 9% said labor costs. Meanwhile, 3% reported their last loan was harder to get than previous attempts, down one point from July, but a net 6% of owners cited paying a higher rate on their most recent loan, up one point from the prior month.

The outlook for general business conditions decreased two points to 34%, a positive read by historical standards. Additionally, 14% reported that it is a good time to expand their business, down two points from July, which is not a strong read compared to times of economic expansion. Nonetheless, small business owners remain optimistic that their uncertainties will be resolved and business conditions will improve by year-end.