According to the latest Q1 Index report from the U.S. Chamber of Commerce, small business confidence improved slightly in the first quarter compared to a year ago, but with ongoing economic uncertainty and persistent inflation continuing to limit growth.
Speaking on the latest episode of Business Trends Today, Tom Sullivan, Vice President of Small Business Policy at the U.S. Chamber of Commerce, asserts that the index reflects a mixed outlook, with many businesses maintaining stable operations but falling short of stronger expansion.
“The positive is that small business outlook in the first quarter is actually better than a year ago,” Sullivan said. “The bad news is small businesses are kind of steady state.”
He suggested that, while some business owners report comfort with cash flow and day-to-day operations, that level of performance is not enough given the current policy environment and the incentives available to support growth.
Inflation remains the most pressing concern for small businesses, topping the list for 17 consecutive quarters. Sullivan said rising costs across the economy, including fuel and goods, continue to weigh heavily on business owners.
“When inflation is a concern and small businesses are kind of flatlined, that raises the alarm bells,” he said.
Additionally, broader uncertainty is also contributing to the cautious outlook. Sullivan pointed to geopolitical tensions, including conflict involving Iran, as well as shifting tariff policies and energy price volatility, as key factors affecting business sentiment.
Beyond short-term pressures, structural challenges such as high housing and construction costs and ongoing labor shortages are adding to the strain. Sullivan emphasized that increasing the supply of both energy and labor is critical to easing these constraints.
Despite these headwinds, however, Sullivan highlighted the resilience of small business owners, noting that many continue to pursue entrepreneurship and adapt to changing conditions. He said that individuals’ willingness to take on greater workloads in exchange for independence remains a key driver of stability.
For small business owners navigating the current environment, Sullivan advised building strong peer networks and maintaining close relationships with trusted advisors.
“If you don’t have a group of people giving you candid advice … then you’re going to have a harder time at it,” he said.
Small businesses remain a central pillar of the U.S. economy, Sullivan said, but unlocking stronger performance will depend on reducing uncertainty and addressing long-term cost pressures.
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