Business confidence has leveled off, according to the monthly report from the National Federation of Independent Business (NFIB), the Small Business Optimism Index. The monthly survey takes the temperature of small businesses across the country based on numerous key factors, including sales, employee compensation, inflation, expansion and capital outlays, and other economic touchpoints.
Although “inflation” has claimed the top spot numerous times in recent years, “taxes” edged it out for the first time since 2021 (“taxes” was tied for second place with “inflation” in the May report, with “quality of labor” cited as the top concern).
NFIB Chief Economist Bill Dunkelberg
“Small business optimism remained steady in June while uncertainty fell,” said NFIB Chief Economist Bill Dunkelberg. “Taxes remain the top issue on Main Street, but many others are still concerned about labor quality and high labor costs.”
The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. The 50-year average of the Small Business Optimism Index is 98, and it remained steady in June at 98.6. As we noted in the summary of the May report, the Optimism Index jumped eight points from October to November 2024 (93.7 to 101.7, respectively), and another three points in December 2024 (105.1), but has been hovering around 98 since.
Highlights from the report:
- The net percent of owners expecting better business conditions fell three points from May to a net 22% (seasonally adjusted). Historically, this is still a positive reading with the 51-year average at a net 3%.
- The net percent of owners expecting higher real sales volumes fell three points from May to a net 7% (seasonally adjusted).
- Twenty-one percent (seasonally adjusted) plan capital outlays in the next six months, down one point from May.
- The percent of small business owners reporting labor quality as the single most important problem for business remained at 16%, unchanged from May. The last time complaints about labor quality fell below 16% was in April 2020. Fewer small business owners reporting labor as their top problem aligns with other data suggesting a more tempered labor market economywide.
- Eleven percent of owners reported that inflation was their single most important problem in operating their business (higher input costs), down three points from May and the lowest reading since September 2021. Inflation pressures continue to ease on Main Street.
- The data on overall health of respondents’ business showed substantial deterioration, with declines in the percentages reporting their business was in excellent or good health. When asked to rate the overall health of their business, 8% reported excellent (down six points), and 49% reported good (down six points). Thirty-five percent reported the health of their business was fair (up seven points), and 7% reported poor (up three points).
With the passage of H.R. 1, nicknamed the One Big Beautiful Bill, federal taxes may be less of a concern moving forward. Associations, including NFIB, reacted to the bill and highlighted some of its benefits for business owners, which can be read here.
The full NFIB report can be found here.
Visit nfib.com for more information.
[07.15.25]
