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

Small Business Optimism Index Pulls Back for the Fourth Consecutive Month in April  

• The NFIB's Small Business Optimism Index fell 1.6 points to 95.8, the second consecutive month below the long-term average of 98. The uncertainty index decreased 4 points on the month, but at a reading of 92 remained well above the historical average of 68.
• Six out of ten subcomponents deteriorated on the month. Large declines were recorded in expectations about an improvement in the economy (-6 points to 15%) and higher 'real' sales (-4 points to -1%). Capital outlay plans, along with plans to increase inventories also deteriorated on the month. On the other hand, earnings trends posted a notable improvement (+7 points to -21%). 
• Tilting to labor market indicators, the net share of businesses planning to increase employment increased 1 point to 13%. On the other hand, the share of firms with unfilled job openings fell sharply by 6 points to 34%. Quality of labor concerns held steady at 19%, with this being identified as the top business problem. 
• The net share of firms increasing employee compensation reversed last month's gain, falling 5 points back to 33%, while the net share 'planning' to raise wages in the months ahead fell 2 points to 17%. In contrast, the share of businesses raising average selling prices rose 1 point to 25%, while the share of those 'planning' to raise average selling prices ahead fell 2 points to 28%. Inflation was identified as a major problem by 14% of small business owners, down from over 20% at the end of last year. This puts inflation in third place among businesses concerns behind quality of labor (19%) and taxes (16%). 

Key Implications

• Small business confidence continued to deteriorate in April, a move that was reflected in declines among the expectations subcomponents and was in tune with still-elevated uncertainty. However, beneath the headline, there were some positive tidbits, including a notable improvement in earning trends and labor marker indicators that continue to hold up decently. 
• In line with better-than-expected CPI inflation numbers out this morning, inflation-related indicators from the NFIB survey also appeared to offer a sigh of relief. Inflation concerns continue to ease, and despite elevated trade tensions in April, pricing plans among small businesses still edged modestly lower. A de-escalation to the U.S.-China trade skirmish marks a recent positive development that should help reduce overall uncertainty and potentially help inject some more confidence among small businesses in the months ahead.          

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.