SMB optimism climbs in June as economic challenges persist, NFIB reports  

According to the latest National Federation of Independent Business (NFIB) Small Business Economic Trends survey, small business optimism improved in June, despite inflation becoming the top concern for owners once again.

The NFIB Small Business Optimism Index rose by 2.1 points to 97.4 in June, coming close to its 52-year average of 98.0. Notably, seven of the 10 components of the index improved, driven by stronger expectations for business conditions and higher projections for real sales.

While confidence increased, uncertainty remained high, with the NFIB Uncertainty Index falling two points to 89. This figure is still well above the historical average of 68, with fewer owners expressing concerns about future capital spending plans.

Challenges in hiring   

The Employment Index decreased to 100.2, marking its fourth consecutive monthly decline; however, hiring challenges persisted. 32% of owners reported having job openings they could not fill, an increase of three points from May, while 19% identified labor quality as their most significant business issue, reflecting the highest level in recent months.

At the same time, pressures related to labor costs continued to ease. Only 8% of owners cited labor costs as their top concern, down six points from a record high in May. Additionally, wage increases slowed, with a net 28% of businesses raising compensation in June, the lowest level recorded this year.

Strengthening capital spending plans

Moreover, the report indicated that 51% of owners made capital investments in the past six months, down four points from May. Equipment purchases remained the most common type of investment, followed by vehicle purchases.

Looking ahead, business owners appeared more willing to invest, with 20% planning capital expenditures over the next six months, the highest reading for 2026 and four points higher than in May. Sales expectations also improved, with a net 9% of owners anticipating higher real sales in the next three months, which is an increase of eight points from May.

Conversely, despite growing optimism, profitability weakened, as a net 20% reported declining earnings due to rising material costs, softer sales, and pricing pressures affecting their margins.

Inflation returns as primary concern

Inflation reemerged as the primary challenge for small businesses in June, with 21% of owners ranking it as their single biggest problem, which is an increase of three points from May and the highest level since October 2024. Additionally, businesses raised prices at the fastest pace in three years, with a net 38% reporting higher selling prices.

The NFIB noted that lower oil prices have helped reduce transportation and delivery costs for some businesses. However, persistent inflation is likely to keep the Federal Reserve cautious about lowering interest rates, which means borrowing costs may remain high for many small firms.

Further, the average interest rate on short-term loans dropped to 7.4% in June, the lowest level since October 2022. Nevertheless, borrowing activity remained quiet, with only 22% of owners reporting regular borrowing, which is well below the historical average. More businesses also expect credit conditions to worsen rather than improve in the coming months.

Despite ongoing challenges, most owners remain confident in their businesses. 67% rated their business’s health as excellent or good, while 8% believe now is a good time to expand, suggesting a sense of cautious optimism as the second half of 2026 begins.