News & Insights

The NFIB Small Business Optimism Index inched down 0.5 points to 98.8 in February, remaining just above the 52-year average of 98. February’s decrease was due primarily to a decline in sales expectations, which more than offset a jump in earnings trends. Of the 10 components included in the index, three increased, four decreased and three stayed the same. Meanwhile, the Uncertainty Index fell 3 points to 88, still well above the 51-year average (68) and above the average since 2016 (80).

Taxes were again cited as the top concern for small business owners, with 19% reporting them as the most important problem, up 1 point from January. The share of business owners reporting labor quality as the top problem fell 1 point from January to 15%, with 33% struggling to fill open jobs and 54% reported hiring or trying to hire in February. Meanwhile, inflation ranked third in the list of concerns, with 12% reporting it as their top problem, unchanged from January, with a net 24% raising prices.

A net 34% of small business owners reported raising compensation, up 2 points in February after moving up 1 point in January. Meanwhile, 22% of business owners plan to increase compensation in the next three months, unchanged from January. Pressure on profitability weakened in February, with positive profit trends rising 7 points from January to a net negative 14%. Among owners reporting lower profits, 28% blamed weaker sales, 19% mentioned usual seasonal changes, 13% cited increased material costs, 7% noted labor costs and the same percentage mentioned insurance costs. Meanwhile, 5% reported their last loan was harder to get than previous attempts, up 2 points from January, and a net negative 3% of owners cited paying a higher interest rate on their most recent loan, up 3 points from the prior month.

The outlook for general business conditions declined 3 points to 18%, remaining above the historical average of 4%. Furthermore, expectations for better business conditions are down 19 points from February 2025. At the same time, 15% reported that it is a good time to expand their business, unchanged from January and a rather weak reading compared to times of economic expansion. Overall, growth remains robust while the labor market falters, as small business owners continue to anticipate economic conditions to remain more moderated.