NFIB Small Business Optimism Index Declines Amid Rising Uncertainty
NFIB Small Business Optimism Index Declines Amid Rising Uncertainty
In March 2025, the National Federation of Independent Business (NFIB) reported a significant decline in its Small Business Optimism Index, which fell by 3.3 points to 97.4. This marks the third consecutive monthly decrease and brings the index below its 51-year average of 98, indicating growing concerns among small business owners.
NFIB Chief Economist Bill Dunkelberg commented on the findings, stating that the implementation of new policy priorities has heightened uncertainty among small business owners. He noted that many have scaled back expectations for sales growth as they assess the potential impacts of these policy changes.
Key findings from the NFIB report include:
Decreased Business Condition Expectations: The net percentage of owners anticipating improved business conditions dropped by 16 points to 21%, the lowest level since October and the most significant decline since December 2020.
Sales Growth Concerns: The net percentage of owners expecting higher real sales volumes fell by 11 points to 3%, marking the third consecutive monthly decline in sales expectations.
Labor Quality and Taxation Issues: Labor quality remains the top concern for small business owners, with 19% citing it as their primary challenge. Additionally, the percentage of owners identifying taxes as their most significant problem rose by two points to 18%, the highest since November 2021.
Pricing Strategies: The net percentage of owners raising average selling prices decreased by six points to 26%, the largest monthly drop since December 2022, though it remains historically high. Conversely, a seasonally adjusted net 30% plan to increase prices in the next three months, the highest reading in a year.
Hiring Plans: A net 12% of owners plan to create new jobs in the next three months, down three points from February, reflecting caution in hiring amid prevailing uncertainties.
The survey was conducted prior to the announcement of new tariffs on April 2, which have since introduced additional uncertainties for small businesses. The potential impact of these tariffs on inflation and economic growth remains a concern, as highlighted by Federal Reserve Chair Jerome Powell.
In summary, the latest NFIB data reveals a notable decline in small business optimism, driven by uncertainties surrounding new policy implementations and ongoing challenges related to labor quality and taxation. These factors are prompting small business owners to adopt a more cautious outlook regarding future business conditions and sales growth.
