U.S. NFIB Small Business Optimism Index (October 2024)

Small Business Optimism Index Improved in October

• The NFIB's Small Business Optimism Index rose 2.2 points to 93.7 in October, coming in slightly above market expectations. October was the 34th month that the index was below its 50-year average of 98.
• Eight of the ten subcomponents improved on the month, one fell, and one remained unchanged. The largest improvement was in expectations about the economy (up 7 points to -5%), followed by expectations about higher real sales (up 5 points to -4%), and plans to make capital outlays (up 3 points to 22%).
• The net share of businesses planning to increase employment held steady at 15%, while the share of firms with unfilled job openings rose 1 point to 35%. Quality of labor concerns rose 3 point to 20%, undoing only part of the 4-point drop in the prior month. Inflation concerns remained top of mind, holding steady at 23% for the second month in a row. 
• The share of firms increasing worker compensation continued to trend lower, falling by 1 point to 31%, while the net share planning to do so over the next three months held steady at 23%. The share of businesses 'raising' average selling prices ticked down one point to 21%, while the share of those 'planning’ to raise average selling prices increased one point to 26%.  
• The uncertainty subindex surged higher, rising 7 points to a new record high of 110 points in October. This is over 10-12 points higher than the peak uncertainty in the periods preceding the last two elections. 

Key Implications

• Small business confidence recorded a moderate improvement in October – a welcome development, even as this did little to change the status quo of sentiment remaining well below historical norms. Looking under the hood, perhaps the most salient development was the surge in the uncertainty subcomponent. While rising uncertainty has become typical in the periods preceding elections, the corresponding subindex surged to a new record high – something that speaks volumes to the unease of small business owners ahead of last week's election. 
• With new leadership at the White House, small businesses should feel more certain about business conditions, setting the stage for an improvement in confidence. Additionally, the first time Trump won the presidency in 2016, small business optimism surged higher on the hopes of a more business friendly environment (given pledges to reduce regulation, lower taxes etc.). Although the economy is on different footing now and facing a different set of challenges, we anticipate we're likely to see an improved mood among small business owners to cap off the year.          

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