Small business optimism hits its seventh-month high as sales outlook improves

U.S. small business optimism increased slightly in August, reaching its highest level since January. Business owners expressed greater confidence in sales prospects and the overall health of their customers.

The National Federation of Independent Business (NFIB) reported on Tuesday that its optimism index rose by 0.5 points to 100.8. This increase was mainly attributed to stronger sales expectations, with a net 12% of owners anticipating higher retail sales over the next three months, which is a 6-point increase from July.

Nearly 70% of business owners, or 66%, rated their company’s health as excellent or good, while 31% considered conditions to be fair or poor, showing improvement from the previous month. At the same time, 34% of respondents expect better business conditions in the coming months, a slight decrease from July, and only 14% believe it is a good time to expand, also down from the previous month.

Although inflationary pressures seemed to ease, 21% of owners reported raising prices, the lowest percentage this year, and fewer businesses plan to increase prices in the near future. The NFIB’s uncertainty index fell to 93 in August, down four points but still one of the highest readings in decades, reflecting ongoing concerns about financing and capital expenditures.

Despite new tax provisions signed into law by President Trump in July as part of his “One Big Beautiful Bill” to encourage investment, plans for capital expenditure decreased slightly. Only 21% of owners plan to make major spending in the next six months.

Labor challenges continue to be a concern, with 21% citing worker quality as their top issue, unchanged from July. However, job openings have eased, with 32% of firms reporting unfilled positions, the lowest level since December 2020.

Overall, the data indicate that small business sentiment is improving as firms experience stronger sales prospects and reduced price pressures. Nevertheless, many business owners remain cautious about expansion and long-term investments.