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The NFIB Small Business Optimism Index rose by three points in May to 98.8, marking a return above the 51-year average and reflecting improved expectations for business conditions and sales. However, small business owners continue to grapple with uncertainty, and for the first time since 2020, taxes have emerged as the most pressing problem.
“Although optimism recovered slightly in May, uncertainty is still high among small business owners,” said NFIB Chief Economist Bill Dunkelberg. “While the economy will continue to stumble along until the major sources of uncertainty are resolved, owners reported more positive expectations on business conditions and sales growth.”
Key findings from the May report include:
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Optimism Index: Increased to 98.8, up three points from April.
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Sales Expectations: A net 10% of owners expect higher real sales volumes, an 11-point jump from the previous month.
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Business Conditions Outlook: A net 25% expect better conditions, a 10-point improvement.
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Capital Spending Plans: 22% plan outlays in the next six months, the highest percentage this year.
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Top Concerns: Taxes were cited as the most important issue by 18% of respondents, the highest share since December 2020.
The Uncertainty Index also rose by two points to 94, while 14% of owners cited inflation as their most critical issue, unchanged from April. Labor quality concerns declined slightly to 16%.
Labor market data revealed that 34% of small businesses had job openings they could not fill in May. While compensation plans rose, fewer businesses reported increasing wages compared to April.
Despite signs of optimism, challenges persist. Reports of declining sales, lower profits, and cautious inventory activity reflect continued economic strain. A net 13% of owners reported lower nominal sales in the past three months, while profit trend reports declined five points to a net negative 26%.
Looking ahead, 10% of small business owners said it is a good time to expand—an increase from April, though still historically low.
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