Small Business Outlook Improves, with Inflation Now the Top Concern

The NFIB Small Business Optimism Index increased 2.1 points to 97.4 in June, remaining slightly below the 52-year average of 98. June’s advance was due to an improvement in expectations for better business conditions and real sales expectations. Of the 10 components included in the index, seven increased and three decreased. Meanwhile, the Uncertainty Index fell 2 points to 89, still well above the 51-year average (68) and above the average since 2016 (80).

Inflation was cited as the top concern for small business owners, with 21% reporting it as the most important problem, up 3 points from May, with a net 38% of owners raising prices. The share of businesses reporting taxes as the most important problem was unchanged from May at 19%. Meanwhile, labor quality or availability shared the spot at second in the list of concerns at 19%, up 6 points from May, with 62% of owners hiring or trying to hire.

A net 28% of small business owners reported raising compensation, down 3 points in June after moving up 1 point in May. Meanwhile, 17% of business owners plan to increase compensation in the next three months, down 1 point from May. Pressure on profitability strengthened in June, with positive profit trends falling 5 points from May to a net negative 20%. Among owners reporting lower profits, 27% blamed weaker sales, 17% cited rising material costs, 9% mentioned usual seasonal changes, 8% noted labor costs and 6% cited taxes or regulatory costs. Meanwhile, 3% of owners reported that their last loan was harder to get than previous attempts, down 1 point from May, and a net 5% of owners cited paying a higher interest rate on their most recent loan, down 1 point from the prior month.

The outlook for general business conditions rose 10 points to 13%, recovering from a recent low in May. At the same time, expectations for better business conditions are down 9 points from June 2025. Meanwhile, 8% reported it is a good time to expand their business, up 1 point from May but a weak reading compared to times of economic expansion. Overall, small business owners are more optimistic as expected business conditions improved for the first time this year.