Small Business Optimism Index
Small Business Optimism Index
Overview
The NFIB Research Foundation has collected Small Business Economic Trends data with quarterly surveys since the 4th quarter of 1973 and monthly surveys since 1986. Survey respondents are drawn from NFIB’s membership. The report is released on the second Tuesday of each month. This survey was conducted in August 2025.
August 2025: Small Business Optimism Improves Again
The NFIB Small Business Optimism Index rose 0.5 points in August to 100.8, nearly 3 points above the 52-year average of 98. Of the 10 Optimism Index components, four increased, four decreased, and two were unchanged. The increase in those expecting real sales to be higher contributed the most to the rise in the Optimism Index. The Uncertainty Index fell by 4 points to 93 but remained well above the historical average. The decline was due to a decrease in uncertainty about financing expectations and planned capital expenditures.
“Optimism increased slightly in August with more owners reporting stronger sales expectations and improved earnings. While owners have cited an improvement in overall business health, labor quality remained the top issue on Main Street.
NFIB Chief Economist Bill Dunkelberg
In August, there was a notable improvement in overall business health. When asked to rate the overall health of their business, 14% reported excellent (up 1 point), and 54% reported it as good (up 2 points). Twenty-seven percent reported the health of their business as fair (down 4 points), and 4% reported poor (unchanged).
The percent of small business owners reporting labor quality as the single most important problem for their business remained at 21%, continuing to rank as the top problem.
In August, 32% (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down 1 point from July. The last time unfilled job openings fell below 32% was in July 2020.
The net percent of owners expecting higher real sales volumes rose 6 points from July to a net 12% (seasonally adjusted). This component contributed the most to the Optimism Index’s increase.
A net 0% (seasonally adjusted) of owners viewed current inventory stocks as “too low” in August, up 3 points from July.
The net percent of owners raising average selling prices fell 3 points from July to a net 21% (seasonally adjusted), the lowest reading of this year.
The frequency of reports of positive profit trends improved 3 points to a net negative 19% (seasonally adjusted). August’s reading was the best since March 2023.
In August, the average rate paid on short maturity loans was 8.1%, down 0.6 points from July and the lowest reading since May 2023.
Twenty-three percent of all owners reported borrowing on a regular basis, down 2 points from July. The last time the percent of business owners borrowing on a regular basis was below 23% was in November 2021.
As reported in NFIB’s monthly jobs report, a seasonally adjusted 32% of all small business owners reported job openings they could not fill in August, down 1 point from July. The last time unfilled job openings fell below 32% was in July 2020. Twenty-eight percent had openings for skilled workers (down 1 point), and 13% had openings for unskilled labor (up 1 point).
The difficulty in filling open positions is particularly acute in the construction, manufacturing, and transportation industries. Nearly half (49%) of small businesses in the construction industry had a job opening they could not fill, down 6 points from July and 11 points below last year’s level. This suggests a softening in the job market. Openings were the lowest in the wholesale and finance industries.
A seasonally adjusted net 15% of owners plan to create new jobs in the next three months, up 1 point from July and the third consecutive monthly increase, a positive trend but historically low.
Of the 53% of owners hiring or trying to hire in August, 81% reported few or no qualified applicants for the positions they were trying to fill. Twenty-six percent of owners reported few qualified applicants for their open positions (down 3 points), and 17% reported none (down 2 points).
In August, 21% of small business owners cited labor quality as their single most important problem, unchanged from July and remaining the top single most important problem. Labor costs reported as the single most important problem for business owners fell 1 point from July to 8%.
Seasonally adjusted, a net 29% reported raising compensation, up 2 points from July. A seasonally adjusted net 20% plan to raise compensation in the next three months, up three points from July.
Fifty-six percent of small business owners reported capital outlays in the last six months, up 1 point from July, but remaining historically low.
Of those making expenditures, 37% reported spending on new equipment, 22% acquired vehicles, and 17% improved or expanded facilities. Thirteen percent spent money on new fixtures and furniture and 5% acquired new buildings or land for expansion.
A net negative 9% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, unchanged from July.
The net percent of owners reporting inventory gains rose 2 points to a net negative 6%, seasonally adjusted. Not seasonally adjusted, 10% reported increases in stocks, and 14% reported reductions. A net 0% (seasonally adjusted) of owners viewed current inventory stocks as “too low” in August, up 3 points from July. A net 1% (seasonally adjusted) of owners plan inventory investment in the coming months, unchanged from July.
Over half (54%) of small business owners reported that supply chain disruptions were affecting their business to some degree, down 10 points from July. Three percent reported a significant impact (down 1 point), 15% reported a moderate impact (down 2 points), 36% reported a mild impact (down 7 points), and 44% reported no impact (up 8 points).
Looking forward to the next three months, seasonally adjusted, a net 26% plan to increase prices, down 2 points from July. The net percent of owners raising average selling prices fell 3 points from July to a net 21%, seasonally adjusted, the lowest reading of this year. Unadjusted, 33% of owners reported higher average prices and 13% reported lower average selling prices. Eleven percent of owners reported that inflation was their single most important problem in operating their business (higher input costs), unchanged for the third consecutive month.
The frequency of reports of positive profit trends improved 3 points from July to a net negative 19% (seasonally adjusted) in August. Among owners reporting lower profits, 37% blamed weaker sales, 18% cited the rise in the cost of materials, 10% cited price change for their product(s) or service(s) and 9% cited labor costs. Among owners reporting higher profits, 65% credited sales volumes, 18% cited usual seasonal change, and 5% cited higher selling prices.
Four percent of owners reported that financing and interest rates were their top business problem in August, unchanged from July. Twenty-three percent of all owners reported borrowing on a regular basis, down 2 points from July. The last time the percent of business owners borrowing on a regular basis was below 23% was in November 2021. A net 3% reported their last loan was harder to get than in previous attempts, down 1 point from July. A net 6% reported paying a higher rate on their most recent loan, up 1 point from July. In August, the average rate paid on short maturity loans was 8.1%, down 0.6 points from July and the lowest reading since May 2023.
The net percent of owners expecting better business conditions fell 2 points from July to a net 34% (seasonally adjusted). In August, 14% (seasonally adjusted) reported that it is a good time to expand their business, down 2 points from July.
Seventeen percent of small business owners reported taxes as their single most important problem, unchanged from July and ranking as the second top problem. The percent of small business owners reporting government regulations and red tape as their single most important problem rose 1 point to 9%. Five percent reported competition from large businesses as their single most important problem, down 1 point from July.
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. Survey respondents are randomly drawn from NFIB’s membership. The report is released on the second Tuesday of each month. This survey was conducted in August 2025.
Labor Market
In August, 32% (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down 1 point from July. The last time unfilled job openings fell below 32% was in July 2020 (Covid). Twenty-eight percent had openings for skilled workers (down 1 point), and 13% had openings for unskilled labor (up 1 point). The difficulty in filling open positions is particularly acute in the construction, manufacturing, and transportation industries. Nearly half (49%) of small businesses in the construction industry had a job opening they could not fill, down 6 points from July and 11 points below last year’s level. This suggests a softening in the job market. Openings were the lowest in the wholesale and finance industries. A seasonally adjusted net 15% of owners plan to create new jobs in the next three months, up 1 point from July and the third consecutive monthly increase, a positive trend but historically low. Overall, 53% reported hiring or trying to hire in August, down 4 points from July. Forty-three percent (81% of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill (down 5 points). Twenty-six percent of owners reported few qualified applicants for their open positions (down 3 points), and 17% reported none (down 2 points). In August, 21% of small business owners cited labor quality as their single most important problem, unchanged from July and remaining the top single most important problem. Labor costs reported as the single most important problem for business owners fell 1 point from July to 8%.
Capitol Spending
Fifty-six percent of small business owners reported capital outlays in the last six months, up 1 point from July, but remaining historically low. Of those making expenditures, 37% reported spending on new equipment (down 1 point), 22% acquired vehicles (down 1 point), and 17% improved or expanded facilities (up 2 points). Thirteen percent spent money on new fixtures and furniture (up 1 point), and 5% acquired new buildings or land for expansion (unchanged). Twentyone percent (seasonally adjusted) plan capital outlays in the next six months, down 1 point from July and a weak reading.
Inflation
The net percent of owners raising average selling prices fell 3 points from July to a net 21% (seasonally adjusted), the lowest reading of this year. Despite the decline, price increases remain above the average of a net 13%, suggesting continued inflationary pressure. Eleven percent of owners reported that inflation was their single most important problem in operating their business (higher input costs), unchanged for the third consecutive month. Tariffs may be starting to impact pricing. Unadjusted, 33% reported higher average prices (down 4 points), and 13% reported lower average selling prices (up 1 point). Price hikes were most frequent in construction (42% higher, 12% lower), finance (41% higher, 15% lower), manufacturing (40% higher, 8% lower), and services (39% higher, 3% lower). Notably, the percent of firms raising prices in the wholesale industry fell 32 points from last month. Looking forward to the next three months, a net 26% (seasonally adjusted) plan to increase prices, down 2 points from July.
Credit Markets
A net 3% reported their last loan was harder to get than in previous attempts, down 1 point from July. Credit availability is not a serious problem for small firms. In August, a net 6% of owners reported paying a higher rate on their most recent loan, up 1 point from July. In August, the average rate paid on short maturity loans was 8.1%, down 0.6 points from July and the lowest reading since May 2023. Twenty-three percent of all owners reported borrowing on a regular basis, down 2 points from July. The last time the percent of business owners borrowing on a regular basis was below 23% was in November 2021.
Compensation and Earnings
In August, both planned and actual labor compensation increased. Seasonally adjusted, a net 29% reported raising compensation, up 2 points from July. A seasonally adjusted net 20% plan to raise compensation in the next three months, up 3 points from July, suggesting inflation could get stickier as these costs are passed on. The frequency of reports of positive profit trends improved 3 points from July to a net -19% (seasonally adjusted). August’s reading was the highest (least negative) since March 2023. Among owners reporting lower profits, 37% blamed weaker sales, 18% cited the rise in the cost of materials, 10% cited price change for their product(s) or service(s), and 9% cited labor costs. Among owners reporting higher profits, 65% cited sales volume, 18% cited usual seasonal change, and 5% cited higher selling prices.
Sales and Inventories
A net -9% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, unchanged from July. August’s reading remains below the historical average of a net 0%. The net percent of owners expecting higher real sales volumes rose 6 points from July to a net 12% (seasonally adjusted). This component contributed the most to the Optimism Index’s increase. The net percent of owners reporting inventory gains rose 2 points to a net -6% (seasonally adjusted). Not seasonally adjusted, 10% reported increases in stocks (down 2 points), and 14% reported reductions (down 3 points). A net 0% (seasonally adjusted) of owners viewed current inventory stocks as “too low” in August, up 3 points from July. A net 1% (seasonally adjusted) of owners plan inventory investment in the coming months, unchanged from July. In August, over half (54%) of small business owners reported that supply chain disruptions were affecting their business to some degree, down 10 points from July. Three percent reported a significant impact (down 1 point), 15% reported a moderate impact (down 2 points), 36% reported a mild impact (down 7 points), and 44% reported no impact (up 8 points).
Outlook
In August, there was a notable improvement in overall business health. When asked to rate the overall health of their business, 14% reported it as excellent (up 1 point), and 54% reported it as good (up 2 points). Twenty-seven percent reported the health of their business as fair (down 4 points), and 4% reported it as poor (unchanged). The net percent of owners expecting better business conditions fell 2 points from July to a net 34% (seasonally adjusted). Historically this is a very positive reading. In August, 14% (seasonally adjusted) reported that it is a good time to expand their business, down 2 points from July. Compared to readings during economic expansions, this is not a strong reading.
Single Most Important Problem
In August, the percent of small business owners reporting labor quality as the single most important problem for their business remained at 21%, continuing to rank as the top problem. Labor costs reported as the single most important problem for business owners fell 1 point from July to 8%. Seventeen percent of small business owners reported taxes as their single most important problem, unchanged from July and ranking as the second top problem. The percent of small business owners reporting government regulations and red tape as their single most important problem rose 1 point to 9%. Eleven percent of owners reported that inflation was their single most important problem in operating their business, unchanged for the second consecutive month. The percent of small business owners reporting poor sales as their top business problem fell 1 point to 10%. In August, 9% reported the cost or availability of insurance as their single most important problem, up 1 point from July. Four percent reported that financing and interest rates was their top business problem in August, unchanged from July. Five percent reported competition from large businesses as their single most important problem, down 1 point from July.
Commentary
Overview
For well over a year, virtually all of our economic indicators flashed “recession.” However, it didn’t happen, at least not yet. Now it’s looking more like a “jobless recovery” from an “almost recession.” The stock market is hitting record highs, gold set a new record high, corporate earnings are very good, consumer spending is solid, and inflation is subdued.
In this context, the Small Business Optimism Index has managed to break out of its funk, running below 99 from October 2021 to October 2024, then rising to over 105 in December 2024. The current reading of 100.8, while lower than late last year, is above the 51-year average of 98.
As good as all that sounds, that’s not the whole story. Hiring remains weak, and labor quality is the top business problem. Unfilled job openings are disappearing, but not because they are filled. Actual and planned capital spending remain weak, hopefully the new depreciation rules and permanent 20% small business deduction will stimulate some investment spending. Owners are optimistic about improving business conditions by year end, hopefully stronger sales and more favorable tax rules. For now, the economy is on a good footing, but small business owners are hoping that their “uncertainties” will be favorably resolved.
Quotes from NFIB Members
“The biggest drag for small businesses in today’s market is government regulations and red tape both federal and state.” – Property management, CO
“In the last five to six years, expenses have gotten to the point where our operation has to use savings to pay our bills. Our margin is way worse than it was in the 80s or 90s. Our commodity prices are the same as those in the early 90s. Property taxes and the inputs that we buy are way out of control. No farm operation will survive in the state of Ohio or even in the whole country. Corporate America is stealing us blind, and we have no way to make this up on our prices.” – Agriculture, OH
“We experienced a short hiccup in business when the new administration took over, but that quickly improved to normal levels. Wages and most costs have leveled off over the last six months and we are finally getting more applicants in the door, which has improved staffing levels as well as overall skills.” – Retail, MN
“Forty-eight years in business, and we have seen a lot of fluctuation in the economy. You just have to ride it out and adjust the best you can with the ups and downs.” – Financial services, TN
