The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index increased by 1.7 points in July, reaching 100.3. This figure is slightly above the index’s 52-year average of 98. The main contributors to this rise were business owners’ improved outlook on business conditions and a greater sense that it is a good time to expand operations.
However, the NFIB Uncertainty Index also rose, climbing eight points from June to reach 97. Labor quality emerged as the top concern among small business owners, with 21% identifying it as their most significant problem—an increase of five points from June.
“Optimism rose slightly in July with owners reporting more positive expectations on business conditions and expansion opportunities,” said NFIB Chief Economist Bill Dunkelberg. “While uncertainty is still high, the next six months will hopefully offer business owners more clarity, especially as owners see the results of Congress making the 20% Small Business Deduction permanent and the final shape of trade policy. Meanwhile, labor quality has become the top issue on Main Street again.”
NFIB State Director Michael Smith added: “Despite hiring challenges and lingering uncertainty, our members are hopeful that the business environment will improve and there will be greater opportunities to expand. There’s no question that making 20% Small Business Deduction permanent has played a significant role in boosting Main Street’s optimism.”
The survey found improvements in overall business health ratings: 13% of respondents rated their businesses as excellent (up five points), while those rating their businesses as good increased by three points to 52%. Those reporting fair or poor health dropped by four and three points respectively.
Reports of poor sales as a primary issue reached their highest level since February 2021 at 11%, up one point from June. Expectations for better business conditions improved significantly; a net 36% expected better conditions over the next six months—a reading above historical averages.
Sixteen percent indicated it was a good time to expand their businesses, an increase of five points from June. Inflation remained steady as an important problem for small businesses at 11%, unchanged from June and at its lowest since September 2021.
Planned capital outlays saw a slight uptick; seasonally adjusted, 22% plan investments in the next six months—one point higher than June but below the long-term average.
According to NFIB’s monthly jobs report, job openings that could not be filled dropped three points to a seasonally adjusted rate of 33%, which is still above historical averages but marks the lowest level since December 2020. Among those hiring or trying to hire in June, most reported few or no qualified applicants for open positions.
A net negative nine percent reported higher nominal sales over the past three months—a decline from June—and inventory gains remained negative overall.
Twenty-eight percent plan price increases despite some easing compared to previous months; meanwhile, profit trends remained subdued with weaker sales being cited most often for lower profits.
Financing concerns edged up slightly but remain relatively low historically; only four percent cited financing and interest rates as their top issue in July.
Taxes were named by seventeen percent as their single biggest challenge—down two points from June—making taxes second only to labor quality among owner concerns. Government regulations followed closely behind other issues such as competition from large businesses.
The data comes from NFIB’s ongoing economic trends surveys conducted since the fourth quarter of 1973 on a quarterly basis and monthly since 1986 among randomly selected members across its network.
