The National Federation of Independent Business (NFIB) released its Small Business Optimism Index for January, showing a slight decrease of 0.2 points to 99.3. Despite the decline, the index remains above its 52-year average of 98. Out of ten components in the index, three increased while seven decreased. The most notable change was a six-point rise in expected real sales volume. The Uncertainty Index also increased by seven points to 91, mainly due to more owners expressing doubt about expanding their businesses.
“While GDP is rising, small businesses are still waiting for noticeable economic growth,” said NFIB Chief Economist Bill Dunkelberg. “Despite this, more owners are reporting better business health and anticipating higher sales.”
Noah Finley, NFIB Illinois State Director, commented on the situation: “While politicians are chasing the headlines, small business owners are watching the data and policies coming out of Washington and Springfield. Legislation that would raise their costs, such as yet another minimum wage hike or the proposed job tax, gives them pause, making them less likely to invest in our Main Street communities.”
A new feature in this report is the NFIB Small Business Employment Index, which compiles jobs-related questions into a single figure. For January, it stood at 101.6—about 1.5 points above its historical average—indicating a balanced labor market.
Other findings from the survey show that insurance costs or availability became a growing concern for small businesses; 13% cited it as their top problem—the highest since December 2018. Capital spending rose as well: sixty percent reported expenditures over the past six months—the highest level since November 2023—with nearly half investing in new equipment.
Credit conditions showed some improvement as fewer owners reported paying higher interest rates on recent loans compared to December figures. Labor quality concerns eased slightly for the third consecutive month; only 16% identified it as their main issue.
Inventory levels improved modestly with more owners reporting gains than losses—the best result since January last year—and supply chain disruptions affected fewer businesses than before.
Price increases remained common but declined somewhat from December’s numbers; inflation continues to be an ongoing issue with twelve percent citing it as their primary challenge.
In terms of overall business health assessments by respondents: fourteen percent rated their situation as excellent (an increase), fifty-four percent called it good (unchanged), twenty-seven percent described it as fair (a decrease), and four percent rated it poor (a slight increase).
Job openings remained elevated compared to historical averages even though there was a slight drop from December’s numbers; many employers continued struggling to find qualified applicants.
Planned capital outlays for the next six months were weaker historically despite recent upticks in actual spending activity among small firms.
The percentage expecting better business conditions fell slightly while those viewing expansion opportunities favorably ticked up two points but stayed low relative to previous economic expansions.
Taxes were again ranked as the most significant problem by eighteen percent of respondents—ahead of labor quality or inflation concerns—suggesting that other issues like poor sales or competition were less pressing during this period.
The monthly survey is conducted among randomly selected NFIB members and has been tracking trends since quarterly surveys began in late 1973 and monthly surveys started in 1986.
