NFIB Small Business Optimism Index Reaches Highest Level Since October 2018

On Tuesday, the National Federation of Independent Business (NFIB), one of the largest small business associations in the US, released its latest NFIB Small Business Optimism Index (SBOI) report. The December SBOI increased 3.4 points to a reading of 105.1. This marks the second consecutive month above the 51-year average of 98 and the highest reading since October 2018.

Of the 10 Optimism Index components, seven increased, two decreased, and one was unchanged. The Uncertainty Index declined 12 points to reading of 86.

Other highlights of the SBOI include the following:

• The net percentage of owners expecting the economy to improve rose 16 points from November to a net 52% (seasonally adjusted), the highest since 1983Q4.
• The percentage of small business owners believing it is a good time to expand their business rose 6 points to 20% (seasonally adjusted). This is the highest reading since February 2020.
• The net percentage of owners expecting higher real sales volumes rose 8 points to a net 22% (seasonally adjusted), the highest reading since January 2020.
• A net 6% (seasonally adjusted) of owners plan inventory investment in the coming months, up 5 points from November and the highest reading since December 2021.
• Seasonally adjusted, a net 29% reported raising compensation—down 3 points from November and the lowest reading since March 2021.
• A net 1% of owners reported paying a higher rate on their most recent loan, down 4 points from November and the lowest reading since September 2021.
• 20% of owners reported that inflation was their single most important problem in operating their business (higher input and labor costs), unchanged from November and leading labor quality as the top issue by 1 point.

Commenting on the SBOI report, NFIB Chief Economist Bill Dunkelberg said:

“Optimism on Main Street continues to grow with the improved economic outlook following the election. Small business owners feel more certain and hopeful about the economic agenda of the new administration. Expectations for economic growth, lower inflation, and positive business conditions have increased in anticipation of pro-business policies and legislation in the new year.”