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

Small Business Optimism Falls Modestly in June 

• The NFIB's Small Business Optimism Index fell 0.2 points to 98.6 in June, coming in on-par with market expectations.
• Four out of ten subcomponents deteriorated on the month, four improved, and two remained unchanged. The largest declines came from the share of businesses reporting current inventory levels as too low (down 6 points to -5%) and expectations for higher real sales over the second half of the year (down 3 points to 7%). A silver lining was the share of firms reporting higher real sales in the current quarter improved (up 4 points to -22%). Expectations for the economy to improve in the second half of the year declined (down 3 points to 22%).
• The net share of businesses planning to increase employment rose 1 point to 13%. The share of firms with unfilled job openings rose 2 points to 36%. Quality of labor concerns were unchanged in June, with 16% of business owners identifying this as their top business problem.
• The net share of firms currently increasing employee compensation rose 7 points to 33%, while the net share planning to do so over the next three months fell 1 point to 19%. The share of businesses 'raising' average selling prices rose 4 points to 29% while the share of those 'planning’ to raise average selling prices also rose 1 point to 32% - a 15-month high.

Key Implications

• Small business confidence remained steady in June at relatively subdued levels as uncertainty remained elevated. The number one concern for small businesses continued to be taxes, as Congress worked to pass the One Big Beautiful Bill Act (OBB) and prevent the end of year tax hike resulting from the expiration of the 2017 Tax Cuts & Jobs Act. With the OBB now signed into law, concerns related to tariffs are likely to return as a top-of-mind concern for small businesses.
• It is likely that tariffs have begun to apply upward pressure to selling prices, with the share of small businesses currently raising prices or planning to do so continuing to rise. For the broader economy, we have not yet seen the increase in the producer price index filter through to consumer prices, but as small businesses typically have thinner profit margins it may be the case that the higher costs cannot be forestalled in their transmission to consumers. With many of the reciprocal tariff rates announced in recent days appearing to be unchanged relative to April 2nd, trade uncertainty is likely to remain elevated through the new August 1st deadline.          

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