The NFIB Small Business Optimism Index rose by three points in May, reaching 98.8, slightly surpassing the 51-year average of 98. The increase was mainly driven by improved expectations for business conditions and sales. However, the Uncertainty Index also climbed two points from April to 94.
NFIB Chief Economist Bill Dunkelberg commented on the situation: “Although optimism recovered slightly in May, uncertainty is still high among small business owners. While the economy will continue to stumble along until the major sources of uncertainty are resolved, owners reported more positive expectations on business conditions and sales growth.”
Taxes emerged as a significant concern for small business owners, with 18% identifying it as their most pressing issue, marking an increase of two points from April. This is the first time taxes have topped the list since December 2020.
Michael Smith, NFIB State Director, emphasized this concern: “Taxes are top of mind for our members, surpassing inflation and hiring challenges. Unless Congress acts this year, small business owners will see a massive federal tax hike. That’s why we’re asking Congress to stand up for Main Street and make the Small Business Deduction permanent.”
Key findings from the survey included:
– A net 1% of owners considered their inventory stocks “too low,” marking a seven-point rise from April.
– Expectations for better business conditions increased by ten points to a net 25%.
– Owners expecting higher real sales volumes rose by eleven points to a net 10%.
– Capital outlay plans in the next six months were reported by 22%, up four points.
– Labor quality concerns decreased by three points to 16%.
Despite these improvements, some challenges persist. Fourteen percent of respondents cited inflation as their primary problem. Additionally, labor costs were identified as a growing issue, rising one point to affect 9% of businesses.
The survey also revealed that job openings remained difficult to fill in May. Thirty-four percent reported unfilled positions despite efforts to hire.
On compensation trends, there was a decline in those raising pay levels but an increase in those planning future raises.
In terms of expenditures over the past six months:
– Forty percent invested in new equipment.
– Twenty-six percent acquired vehicles.
– Fifteen percent expanded facilities.
Profit trends showed mixed results with weaker sales being blamed for lower profits while higher sales volumes contributed positively for others.
Financing issues saw slight changes with an increase in those facing higher interest rates on loans.
Overall expansion sentiment remained historically low despite a slight uptick.
The NFIB Research Center has been collecting data since 1973 through quarterly surveys and monthly updates since 1986. This report reflects responses gathered during May 2025.
