Small Business Optimism Improves as Economic Outlook Brightens

Small business owners felt better about the economy in June as business conditions and sales expectations improved.

According to the National Federation of Independent Business’ (NFIB) Small Business Optimism Index, the percentage of owners expecting better business conditions in the next six months rose 10 points from May, a net of 13%. It was the first time the outlook improved this year. That increased optimism was further supported by an 8% rise in the number of owners expecting high real sales volumes over the next quarter (a net of 9%).

With overall conditions improving, more small business owners are planning to invest in their companies. Twenty percent of respondents said they plan to make a capital outlay in the next six months — a 4-point increase from May and the highest reading of 2026. Making those investments may also become a little less expensive, as owners reported the average interest rate paid on short-maturity loans fell 0.4 points to 7.4%, the lowest level since October 2022.

The index itself rose 2.1 in June to 97.4. Despite this improvement, it was below the 52-year average of 98 for the fourth consecutive month. Much of that below-average reading can be attributed to the effect of persistent high inflation on businesses. Twenty-one percent of respondents cited inflation as their single most important business problem in June, up 3% from May. It was the top concern in June and the highest reading for inflation since October 2024.

At 19%, the second most important problem was taxes. The reading was unchanged from May. Other key issues eased during the month, with labor costs falling from its historic high of 14% in May to 8%, and government regulations decreasing by 2 points (6%).

“Current economic conditions present small business owners with both encouraging developments and ongoing challenges,” NFIB Chief Economist Bill Dunkelberg said. “Lower fuel costs provide welcome relief for businesses as well as consumers, with firms anticipating improved operating conditions over the next six months. While there have been improvements in the overall environment, high interest rates and modest economic growth are causing owners to approach hiring and capital spending with caution.”

The full report is available here.