U.S. NFIB Small Business Optimism Index (July 2025)

Small Business Optimism Improves in July 

• The NFIB's Small Business Optimism Index rose 1.7 points to 100.3 in July, coming in above market expectations. The uptick came despite a major increase in the uncertainty subindex (up 8 points to 97). 
• Six out of ten subcomponents improved on the month, two decreased, and two remained unchanged. The largest gains were in expectations about an improvement in the economy (up 14 points to 36%) and the belief that now is a good time to expand (up 5 points to 16%).
• The net share of businesses planning to increase employment rose 1 point to 14%, but the share of firms with unfilled job openings fell 3 points to 33%. Quality of labor concerns rose 5 points, with 21% of business owners identifying this as their top business problem.
• The net share of firms currently increasing employee compensation reversed course, falling 6 points to 27%, while the net share planning to do so over the next three months fell 2 points to 19%. The share of businesses 'raising' average selling prices fell 5 points to 24%, while the share of those 'planning’ to raise average selling prices ahead fell 4 points to 28% – both measures remain well above their historical averages.
• The net share of firms citing 'poor sales' as their top business problem was 11% in July, tied with share of firms citing 'inflation' as their top concern.

Key Implications

• Small business optimism improved in July, with small business owners feeling more upbeat about expanding in the current environment and especially about an expected improvement in the economy. The signing of the One Big Beautiful Bill Act (OBBBA) into law in early July is likely to have contributed to this trend – a theme supported by a moderate pullback when it comes to concerns about taxes. 
• Underneath the improved headline index were plenty of soft spots, with elevated uncertainty a case in point. The gradual increase in the share of small businesses citing 'poor sales' as their main business problem also bears watching, with this trend corroborating a softer consumption profile. Concerns about finding qualified workers has become the biggest issue businesses are facing, but several other metrics suggest that labor market pressures are easing – a theme corroborated by a decline in job openings and the fact that fewer firms are raising or planning to raise compensation.          

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