NFIB Small Business Optimism Index Slips in January

On Tuesday, the National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index (SBOI) fell 0.2 points to 99.3 in January. The reading remained above the survey’s 52-year average of 98.

Of the 10 index components, three increased and seven decreased. The largest contributor to the monthly change was expectations for higher real sales volumes, which rose 6 points.

The NFIB Uncertainty Index rose 7 points to 91, driven primarily by an increase in owners reporting uncertainty about whether it is a good time to expand their business.

Other key highlights from the January SBOI include:

• Overall business health: 14% of owners rated their business health as excellent (up 5 points from December); 54% rated it good (unchanged); 27% rated it fair (down 7 points); and 4% rated it poor (up 1 point).
• Labor quality: 16% of owners cited labor quality as their single most important problem, down 3 points from December, marking the third consecutive monthly decline.
• Sales expectations: The net percent of owners expecting higher real sales volumes over the next quarter rose 6 points from December to a seasonally adjusted net 16%.
• Capital outlays: Sixty percent of owners reported capital outlays in the past six months, up 4 points from December and the highest share since November 2023.
• Insurance costs: 13% of owners reported the cost or availability of insurance as their single most important problem, up 4 points from December. This was the highest reading since December 2018.
• Credit conditions: A net negative 6% of owners reported paying a higher interest rate on their most recent loan, down 3 points from December, suggesting more favorable credit conditions for small borrowers.
• Supply chains: 62% of owners said supply chain disruptions affected their business to some degree, down 2 points from December.

In remarks accompanying the release, NFIB Chief Economist Bill Dunkelberg said:

“While GDP is rising, small businesses are still waiting for noticeable economic growth. Despite this, more owners are reporting better business health and anticipating higher sales.”