Small Business Optimism Slips as Inflation and Uncertainty Rise

Small business confidence dipped in September, signaling renewed concern among entrepreneurs over inflation, supply chains, and hiring challenges. According to the latest report from the National Federation of Independent Business (NFIB), the Small Business Optimism Index fell two points to 98.8 — the first decline in three months — though it remains above the survey’s 52-year average of 98.

The report also noted that the Uncertainty Index climbed seven points to 100, the fourth-highest reading in more than five decades.

“Optimism among small business owners decreased in September,” said NFIB Chief Economist Bill Dunkelberg. “While most owners evaluate their own business as currently healthy, they are having to manage rising inflationary pressures, slower sales expectations, and ongoing labor market challenges. Although uncertainty is high, small business owners remain resilient as they seek to better understand how policy changes will impact their operations.”

For many entrepreneurs, inflation remains a persistent headache. Fourteen percent of owners identified inflation as their most significant problem — up three points from August — with higher input costs and supply chain issues leading the concerns. Nearly one-third of owners (31%) said they plan to raise prices over the next three months, signaling that cost pressures are not easing.

Supply chain problems also worsened, with 64% of small business owners reporting disruptions in September, a 10-point jump from the previous month. Inventory levels also shifted sharply, with the number of owners viewing their stocks as “too low” dropping by seven points — the largest monthly decline in the survey’s history.

Despite these challenges, small business owners reported an uptick in profits, with actual earnings changes reaching their highest level since December 2021. A net negative 16% reported profit declines, a modest improvement that suggests businesses are adapting to higher costs through pricing adjustments or improved efficiency.

Hiring continues to be a mixed picture. Eighteen percent of owners cited labor quality as their top concern, tying with taxes as the most frequently mentioned problem. About 32% of small business owners reported job openings they couldn’t fill, unchanged from August. Of those hiring or attempting to hire, 88% said they found few or no qualified applicants. Still, hiring plans edged up slightly — 16% plan to create new jobs in the next three months, the highest level since January.

Wages also remain under pressure. A net 31% of small business owners reported raising compensation, and 19% plan further increases in the next three months. Labor costs ranked as the most pressing issue for 11% of owners, up three points from August.

Investment activity held steady, with 56% of small business owners making capital outlays in the past six months. Most of that spending went toward equipment, vehicles, and facility improvements. However, only 21% plan future capital outlays — a historically weak figure that suggests caution in the months ahead.

Borrowing costs are also climbing. The share of owners paying higher interest rates rose to 7%, with average short-term loan rates hitting 8.8%. More owners reported difficulty securing credit, a sign that tighter financial conditions may be squeezing growth plans.

When asked about the overall health of their businesses, 11% of owners said “excellent” and 57% said “good,” while 27% described their business as “fair.” Only 4% rated their business health as “poor.”

Taxes continue to be a significant concern, cited by 18% of owners as their biggest problem. Government regulations and red tape fell to 6%, while poor sales (10%) and competition from larger businesses (5%) remained stable.

Overall, the report paints a picture of cautious resilience among small businesses — a group facing rising costs, persistent labor shortages, and uncertainty over future policy. Still, many remain optimistic that conditions can improve with stable demand and clearer economic signals.

The full NFIB report is available on the organization’s website at here.

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