The NFIB Small Business Optimism Index rose by 0.5 points in August to reach 100.8, surpassing its 52-year average of 98. The index, which tracks small business sentiment, showed that out of its ten components, four increased, four decreased, and two remained unchanged. The main factor behind the increase was a higher number of owners expecting real sales to rise.
The Uncertainty Index dropped by four points to 93 but stayed above the historical average due to reduced uncertainty about financing and planned capital expenditures.
“Optimism increased slightly in August with more owners reporting stronger sales expectations and improved earnings,” said NFIB Chief Economist Bill Dunkelberg. “While owners have cited an improvement in overall business health, labor quality remained the top issue on Main Street.”
“Despite the hiring challenges, Main Street employers are feeling more confident in the health of the economy,” NFIB State Director Michael Smith said. “Stronger sales and earnings, along with the tax relief delivered by Congress, are certainly playing a role in boosting small business optimism.”
Survey data from August indicated that 14% of small business owners rated their business health as excellent (up one point), while 54% rated it as good (up two points). Those rating their business as fair declined to 27%, and those rating it poor remained at 4%. Labor quality continued to be cited as the most significant problem for businesses at 21%.
Thirty-two percent of owners reported job openings they could not fill—down one point from July—which is the lowest since July 2020. The net percentage expecting higher real sales volumes increased by six points to a net 12%. Inventory levels were viewed as “too low” by a net zero percent of owners (up three points from July). Owners raising average selling prices fell by three points to a net 21%, marking this year’s lowest level.
Reports of positive profit trends improved by three points but still stood at a net negative 19%, which is nonetheless the best reading since March 2023. The average rate paid on short maturity loans fell to 8.1%, its lowest since May 2023. Twenty-three percent reported borrowing regularly—two points less than July—with rates last seen this low in November 2021.
The construction sector experienced particular difficulty filling positions; nearly half (49%) had unfilled jobs, down six points from July and eleven below last year’s figure. This suggests some easing in job market tightness.
A seasonally adjusted net 15% plan to create new jobs over the next three months—a third consecutive monthly increase but still historically low. Among those hiring or trying to hire (53%), eighty-one percent said there were few or no qualified applicants for open roles.
Labor costs as the single most important problem fell by one point from July to eight percent. A seasonally adjusted net twenty-nine percent reported raising compensation (up two points), and twenty percent plan further increases over the next quarter.
Fifty-six percent reported capital outlays over the past six months—a slight increase—but spending remains historically subdued. Of these expenditures, most went toward equipment purchases (37%), vehicles (22%), facility improvements or expansions (17%), fixtures/furniture (13%), or property acquisitions (5%).
Inventory gains improved slightly with a net negative six percent reporting increases; ten percent saw stock rises while fourteen percent noted reductions.
More than half—fifty-four percent—said supply chain disruptions affected their operations in some way; only three percent described significant impacts while forty-four percent reported none at all.
Looking ahead, a seasonally adjusted net twenty-six percent plan price increases within three months—down two points from July—and only eleven percent named inflation as their main operating problem for a third straight month.
Profit trend reports showed improvement: among those citing lower profits, weaker sales led reasons followed by material costs and price changes; among those seeing higher profits, most credited increased sales volumes.
Four percent named financing and interest rates as their top concern; regular borrowing dropped again compared with previous periods. Loan acquisition became marginally easier compared with July but more expensive for some borrowers.
Expectations for better business conditions slipped two points with just fourteen percent saying now is a good time to expand operations—also down from July.
Seventeen percent identified taxes as their primary issue while concerns about regulations rose slightly and worries about competition from large firms eased marginally.
The survey was conducted among randomly selected members of NFIB during August and forms part of ongoing economic trend research that has been conducted quarterly since late-1973 and monthly since 1986.
