News & Insights

The NFIB Small Business Optimism Index inched up 0.5 points to 99.5 in December, remaining slightly above the 52-year average of 98. December’s increase was due primarily to the rise in those expecting better business conditions. Of the 10 components included in the index, two increased, three decreased and five stayed the same. Meanwhile, the Uncertainty Index dropped 7 points to 84, the lowest reading since June 2024 but still well above the 51-year average (68) and slightly above the average since 2016 (80).

Taxes were cited as the top concern for small business owners, with 20% reporting them as the most important problem, up 6 points from November. The share of business owners reporting labor quality as the top problem fell 2 points from November to 19%, with 33% struggling to fill open jobs and 53% reporting hiring or trying to hire in December. Meanwhile, inflation fell to third in the list of concerns, with 12% reporting it as a top problem, down 3 points from November, with a net 30% raising prices.

A net 31% of small business owners reported raising compensation, up 5 points in December after remaining unchanged in November. Meanwhile, 24% of business owners plan to raise compensation in the next three months, unchanged from November. Pressure on profitability weakened in December, with positive profit trends rising 3 points from November to a net negative 20%. Among owners reporting lower profits, 41% blamed weaker sales, 13% cited increased material costs, 12% mentioned usual seasonal changes, 9% reported price changes from their products or services and 7% noted labor costs. Meanwhile, 5% reported their last loan was harder to get than previous attempts, up 1 point from November, and a net negative 3% of owners cited paying a higher interest rate on their most recent loan, down 5 points from the prior month.

The outlook for general business conditions rose 9 points to 24%, the first increase since July. Despite the improvement in December, expectations for better business conditions have fallen 23 points since the start of 2025. At the same time, 13% reported that it is a good time to expand their business, unchanged for the second consecutive month and a rather weak reading compared to times of economic expansion. Overall, despite consumer sentiment remaining low, small business owners anticipate economic conditions to remain broadly favorable in 2026, with cost pressures moderating and other challenges easing.