U.S. NFIB Small Business Optimism Index Improves in August

The NFIB Small Business Optimism Index rose 0.5% (10.5%) to 100.8 in August after strengthening 1.7% to an unrevised 100.3 in July and easing 0.2% to 98.6 in June, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. Four of the ten index components increased last month. The NFIB Small Business Uncertainty Index fell 4.1% (+1.1% y/y) to 93 after rising 9.0% in July.

The outlook for business conditions was mixed in the latest survey. The net balance of respondents expecting the economy to improve stood at 34% last month after rising to 36% in July. A higher 12% expected higher real sales in six months, compared to 6% in July. A lessened 14%, compared to 16% in July, of respondents indicated that now was a good time to expand the business. The figure remained up from 4% last September.

Plans to make capital outlays eased to 21% of firms after rising to 22% in July. Plans to add to inventories were unchanged at 1% of survey respondents, having been negative or zero early in the year. The index of expected credit conditions held steady with five of the prior six months at -4%. It remained up from a low of -11 in November 2023. On the labor front, the percent planning to increase employment edged up to 15% from 14% in July. The increase was to the highest level since February. It was increased from a low of 12% in both March and May, but stood substantially below its high of 32% in August 2021. A lessened 43% of businesses reported few or no qualified workers to fill job openings in August, down from the most recent high of 50% in June. These readings remained below a high of 56% in August of last year.

The net percent of firms reporting higher earnings improved to -19% last month after holding steady at 22% in July. The figure was increased from the August 2024 low of -37%.

On the pricing front, the net percent raising their average selling prices fell to 21% last month from 24% in July. It had grown to 32% in February. The percentage planning to raise prices declined to 26% in August, down from a 32% high in June. Worker compensation improved as a net 29% of respondents lifted compensation during the last three months versus 27% in the last survey. Compensation gains peaked at 50% of firms in January 2022. A higher net 20% of firms are making plans to raise worker compensation in the next three months, below November’s high of 28%.

Taxes were reported by a steady 17% of member firms as the single most important issue facing small businesses. Also steady was the 11% citing inflation as the most important problem. Other major concerns were the cost of labor reported by 9% of firms and government requirements, also at 9%.

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s SURVEYS database.