NFIB Small Business Optimism Index Retreats for Third Consecutive Month in March

On Tuesday, the National Federation of Independent Business (NFIB), one of the largest small business associations in the US, released its Small Business Optimism Index (SBOI) for March. The index declined 3.3 points to 97.4, slipping just below the 51-year average of 98. Meanwhile, the Uncertainty Index dropped 8 points to 96, following February’s reading of 104—the second highest on record.

Other highlights of the report include the following:

• Taxes: The share of small business owners identifying taxes as their top concern rose two points to 18%, the highest level since November 2021.
• Business Outlook: The net percentage of owners expecting improved business conditions fell 16 points to a net negative 21% (seasonally adjusted), marking the third straight monthly decline and the steepest drop since December 2020.
• Business Health: When asked to rate the overall health of their business, 11% of owners reported “excellent” (unchanged), 53% said “good” (down two points), 31% said “fair” (up four points), and 4% reported “poor” (down two points).
• Labor: The quality of labor remained the most cited problem at 19%, unchanged from February. Taxes followed closely behind at 18%.
• Sales Expectations: The net percentage of owners expecting higher real sales volumes dropped 11 points to a net 3% (seasonally adjusted), continuing a three-month slide following a post-election surge from recession levels.
• Inflation: Sixteen percent of owners cited inflation—mainly higher input costs—as their most significant challenge, unchanged from February but down from its previous rank as the second most pressing issue.
• Pricing: The net percentage of owners raising average selling prices fell six points to 26% (seasonally adjusted), the largest monthly decrease since December 2022—though still historically elevated. Meanwhile, a seasonally adjusted net 30% plan to raise prices, up one point from February and the highest since March 2024.
• Credit Conditions: A net 6% of owners said their most recent loan was harder to obtain than previous ones, up four points—the biggest monthly increase since September 2023.
• Borrowing Trends: Twenty-eight percent of owners reported borrowing regularly, a four-point increase from February and the highest level since May 2022.

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

“The implementation of new policy priorities has heightened the level of uncertainty among small business owners over the past few months. Small business owners have scaled back expectations on sales growth as they better understand how these rearrangements might impact them.”