Fifty-four percent of small business owners reported making capital outlays in the last six months, down 6 points from January. Of those making expenditures, 37% reported spending on new equipment (down 7 points), 28% acquired vehicles (up 2 points), and 15% improved or expanded facilities (down 1 point). Ten percent spent money on new fixtures and furniture (down 3 points), and 5% acquired new buildings or land for expansion (unchanged). Eighteen percent (seasonally adjusted) of small business owners plan to make capital outlays in the next six months, unchanged from January. Historically, this is a weak reading.

A seasonally adjusted net 1% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, up 7 points from January. The percent reporting actual sales gains are now close to the historical average of a net 0%. The last time actual sales were this high was in May 2022. While actual sales volume rose in February, sales expectations declined. The net percent of owners expecting higher real sales volumes over the next quarter fell 8 points from January to a net 8% (seasonally adjusted). The net percent of owners reporting inventory gains fell 6 points to a net -3% (seasonally adjusted). Not seasonally adjusted, 10% reported increases in stocks (down 4 points), and 18% reported reductions (up 1 point). The surge in reports of higher sales depleted inventory stocks. A net -2% (seasonally adjusted) of owners viewed current inventory stocks as “too low” in February, up 1 point from January. A net -2% (seasonally adjusted) of owners plan inventory investment in the coming months, unchanged from January in spite of the surge in sales and resulting inventory reductions. In February, 59% of small business owners reported that supply chain disruptions affected their business to some extent, a decrease of 3 points from January. Five percent reported a significant impact (up 1 point), 14% reported a moderate impact (down 3 points), 40% reported a mild impact (down 1 point), and 39% reported no impact (up 2 points).

Seasonally adjusted, a net 34% reported raising compensation, up 2 points from January and the highest level since March 2025. A seasonally adjusted net 22% plan to raise compensation in the next three months, unchanged from January. The frequency of reports of positive profit trends rose 7 points from January to a net -14% (seasonally adjusted). The last time earning trends were this high was in December 2021. Among owners reporting lower profits, 28% blamed weaker sales, 19% cited the usual seasonal change, and 13% cited rising material costs. Nine percent cited price change from their product(s) or service(s), 7% cited labor costs, and 7% reported insurance costs. Among owners reporting higher profits, 61% cited sales volume, 12% cited higher selling prices, and 11% cited usual seasonal change.

A net 5% reported their last loan was harder to get than in previous attempts, up 2 points from January and close to the historical average of a net 6%. In February, a net -3% of owners reported paying a higher interest rate on their most recent loan, up 3 points from January. The average interest rate paid on short maturity loans was 8.2% in February, down 0.9 points from January. Twenty-five percent of all owners reported borrowing regularly, unchanged from January.

In February, reports of actual price increases and planned price hikes declined. The net percent of owners raising average selling prices fell 2 points from January to a net 24% (seasonally adjusted). This marked the third consecutive month that actual price increases slowed, though the changes remain well above the historical average. Unadjusted, 35% reported higher average prices (down 1 point), and 11% reported lower average selling prices (unchanged). Looking forward to the next three months, a net 28% (seasonally adjusted) plan to increase prices, down 4 points from January. As with actual price changes, this is also comfortably above its historical average. Twelve percent of owners reported that inflation was their single most important business problem, unchanged from January and ranking as the third top issue.

When asked to evaluate the overall health of their business, 12% rated it as excellent (down 2 points), 55% as good (up 1 point), 26% as fair (down 1 point), and 5% as poor (up 1 point). The net percent of owners expecting better business conditions fell 3 points from January to a net 18% (seasonally adjusted). This level is still well above its historical average of a net 4%. In February, 15% (seasonally adjusted) reported that it is a good time to expand their business, unchanged from January. This is near the historical average of 15%.

In February, 19% of small business owners reported taxes as their single most important problem, up 1 point from January and ranking as the top problem. Taxes ranking as the top issue is typically a sign that other, less consistent issues (labor quality, inflation, poor sales, etc.) are not currently in a bad state. The percent of small business owners reporting labor quality as the single most important problem for their business fell 1 point from January to 15%, marking the fourth consecutive monthly decline. The last time labor quality, reported as the single most important problem, was this low was in April 2020. The share of owners reporting labor costs as the single most important problem remained at 9%. Twelve percent of owners reported that inflation was their single most important business problem, unchanged from January. The percent of small business owners reporting poor sales as their top business problem rose 2 points to 11%. Poor sales has risen substantially over the past few years. Generally, increases in poor sales as the top issue is concerning, as poor sales peaks in a recession. Hopefully, in this case, the increase is at least partially reflecting the decline in inflation and labor quality as top issues crowding out other smaller problems. The percent of small business owners reporting government regulations and red tape as their single most important problem rose 1 point to 10%. In February, 9% reported the cost or availability of insurance as their single most important problem, down 4 points from January. Eight percent reported competition from large businesses as their single most important problem, up 2 points from January. The last time competition from large businesses, reported as the single most important problem, was this high was in May 2021. Four percent reported that financing and interest rates were their top business problem in February, up 1 point from January.

Recently released government data are framing economic conditions as a mixed picture with solid GDP estimates and employment reports that move wildly monthly to month. When the government hires 100 workers, GDP goes up. When GM hires 100 workers, GDP goes up. GDP counts the values of all goods and services produced in the US, government and private alike. From 2020 to 2024, job growth and GDP were boosted by increases in government employment and spending, but that trend has now reversed. This will lead to some decline in the job numbers. While private sector capital spending does raise GDP by producing lots of stuff, feeling the impact of that spending may take some time as the new investments are put to work. The process is simple: Give employees better tools to do their jobs and output per hour rises. Salaries rise and fewer workers are needed, freeing up employees to apply their skills elsewhere. Capital spending has not been particularly strong for small businesses, but what they buy is undoubtedly more productive. Robots and AI will continue to increase worker productivity, especially in the small business sector.

“We had a large government refund in 2025 for the Employee Retention Tax Credit which really helped. However, we are just barely getting by and not getting ahead.” – Agriculture, NY

“Small businesses face daunting challenges in today’s economy. Higher labor costs, ridiculous high insurance costs, and extensive regulations. Small businesses seem to be set up to fail in the current economic climate, leaving little and eventually no competition for big conglomerates. Very sad to see this in the US!” – Agriculture, OH

“The never-ending increase in the cost of doing business causes small businesses to work longer hours for less profits. Every day, every month, every year, we keep less of the dollar we bring in.” – Services, MO

“The expense of health insurance is ridiculous. As a manufacturer it is nearly impossible to get liability coverage, when you are able the price is unsustainable.” – Manufacturing, KS

“Health insurance is out of control and small businesses and their employees are footing the bill. Something must be done!” – Manufacturing, MN “If inputs and commodities don’t correct very quickly, there will be a huge exodus of young people out of the industry. This country’s food security can not afford that.” – Agriculture, MI

“Inflationary pressures continue to persist, and they make it more difficult to plan pricing and capital expenditures. Overhead expenses continue to rise, more than what is reasonable.” – Agriculture, IN “We work in the auto industry and the lack of new vehicles shipped to the new car dealers really affects our business.” – Wholesale, CA

“We need to keep taxes as low as possible so I can pay employees more money.” – Financial, KS “Too much red tape, taxes, and growth restricted by laws that apply to highyielding companies, preventing ours from growing!” – Retail, NY