NFIB Small Business Optimism Index Trends Higher in July but Remains Below 50-Year Average

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 July. The July SBOI increased 2.2 points to a reading of 93.7. The last time the SBOI was this high was in February 2022.

Nevertheless, the July reading is still below the 50-year average of 98.0, marking the 31st consecutive month below average.

Inflation remains the top issue among small business owners, with 21% reporting it as their single most important problem in operating their business, up 4 points from June.

Other highlights of the SBOI include the following (seasonally adjusted):

• A net 33% reported raising compensation in July, down 5 points from June and the lowest reading since April 2021.
• A net 2% of owners plan inventory investment in the coming months, up 4 points from June. The last time inventory investment plans were positive was in October 2022.
• The net percentage of owners expecting higher real sales volumes rose 4 points in July to a net negative 9%, the highest reading this year.
• The net percentage of owners raising average selling prices fell 5 points from June to a net 22%.
• A net 24% plan price hikes in July, down 2 points and the lowest reading since April 2023.
• Thirty-eight percent of all owners reported job openings they could not fill in the current period, up 1 point from June.:

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

“Despite this increase in optimism, the road ahead remains tough for the nation’s small business owners. Cost pressures, especially labor costs, continue to plague small business operations, impacting their bottom line. Owners are heading towards unpredictable months ahead, not knowing how future economic conditions or government policies will impact them.”