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The NFIB Small Business Optimism Index rose 3.4 points in December to 105.1, the second consecutive month above the 51-year average of 98 and the highest rating since October 2018. Of the 10 components included in the index, seven increased, two decreased and one stayed the same. After declining last month, the Uncertainty Index declined another 12 points to 86, as business leaders gain certainty following the election.

Despite increased optimism, inflation is still the top concern for many small business owners, with 20% identifying higher input and labor costs as their primary issue, unchanged from November and surpassing the issue of labor quality by one point. In December, 35% of small business owners reported jobs they could not fill, down 1% from November.

A net 28% of small business owners planned price hikes in December, unchanged from November. A net 29% of small business owners reported raising compensation, down 3% from November. A net 1% of owners reported paying a higher rate on their most recent loan, down 4% from the previous month and the lowest reading since September 2021. Profitability remained under pressure, with a net negative 26% reporting positive profit trends, the same as November. Of those reporting lower profits, 35% claimed weaker sales.

The outlook for general business conditions continued the positive trend, improving 16 points to 52. Small business owners share the sentiment of consumers, who continue to seek lower prices and not just a slowing of price increases. A continuation of the 2017 tax cuts and deregulation will be the key policy areas of concern for the small business community in 2025.