U.S. NFIB Small Business Optimism Index (March 2026)

Small Business Optimism plummets in March

• The NFIB's Small Business Optimism Index fell 3 points to 95.8 in March, disappointing market expectations for a more modest pullback to 97.9. The last time the Optimism Index fell below its 98-point historical average was at the time of the Liberation Day tariffs in April 2025. The drop came alongside a surge in the uncertainty index, which rose 4 points from 88 to 92, well above its historical average of 68.
• Eight out of the ten index subcomponents deteriorated during the month, two remained unchanged and none improved. The largest decline came from earnings trends (-11 points to -25%), expectations for the economy to improve (-7 points to 11%), and the belief that now is a good time to expand (-4 points to 11%). Plans to make capital outlays and increase inventories also recorded moderate declines. 
• Employment indicators were mixed. The net share of businesses planning to increase employment held steady at 12% (having fallen in each of the previous three months), while unfilled job openings fell one point to 32%. On the other hand, the average change of employment per firm, and the share of firms with an increase in employment in the last three months were broadly positive, leaving behind the weakness recorded around the turn of the year. 
• The net share of firms currently increasing employee compensation fell 1 point to 33%, while the net share planning to do so over the next three months fell 4 points to 18%. The share of businesses 'raising' average selling prices rose one point to 25% while the share of those 'planning’ to raise average selling prices ahead fell 4 points to 24%. Inflation concerns ticked up 2 points to 14% (ranking third among top issues).

Key Implications

• Small business confidence deteriorated for the second month in a row in March, alongside a notable increase in uncertainty that is likely linked to the escalation of the Middle East conflict. Looking under the hood, small business expansion plans and the belief that now is a good time to expand have clearly softened. Employment indicators remain mixed but continue to show resilience. The March survey echoes the theme of improved job creation recently, while small business job openings remain relatively stable. Sustained uncertainty, however, risks eventually dampening labor demand.
• The national average gasoline price now exceeds $4 per gallon, with diesel much higher, posing a significant near-term headwind for small businesses. Increasing energy and related input costs are likely to compress profitability and nudge up inflationary pressures. The uptick in inflation concerns in March speaks to these trends. While viewed as a near-term hurdle for now, the longer the disruption lasts, the greater the chance it becomes a more binding constraint on confidence and activity.         

Disclaimer

This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.