The NFIB’s Small Business Optimism Index came in at 99.3 in January, only a touch below its December reading of 99.5. The uncertainty index rose by 7 points to 91 (back to its November 2025 level), with a rise in owners reporting uncertainty about ‘whether it is a good time to expand’ being the main driver.
Of the ten subcomponents in the index, seven deteriorated and three improved on the month. Most declines were modest, with the most noticeable a 3-point pullback in expectations about an improvement in the economy (to 21%). On the other hand, the net percent of owners expecting higher real sales over the next three months rose 6 points to 16% – the highest level in a year.
The employment indicators mostly trended lower, with plans to increase employment (-1 point to 16%), current job openings (-2 points to 31%), and quality of labor concerns (-3 points to 16%) all pulling back on the month. However, actual hiring appeared to have improved a touch, with the share of firms with an increase in employment over the last three months rising into shallow positive territory for the first time since April.
Inflation concerns held steady at 12% for the second month in a row – this as the share of firms raising average selling prices fell 4 points to 26%. However, the share of firms planning to raise prices over the coming months rose 4 points to 32%, one of the higher readings in the last three years. Moving above inflation concerns, were concerns about “the cost or availability of insurance” (up 4 points to 13% – the highest level since late 2018).
Key Implications
Small business optimism remained slightly above its long-term average at the start of this year but failed to make additional headway as uncertainty – especially related to business expansion efforts – picked up in January. Sifting through the details of the report, improving trends with respect to actual hiring and expectations about higher real sales offer some encouragement.
Subsiding ‘quality of labor’ concerns mark another positive aspect of the report. But small businesses continue to be challenged in other areas – something that is thought to be keeping a lid on business sentiment. To this end, inflation concerns, while steady, are still elevated. Additionally, rising concerns about the cost and availability of insurance highlights another emerging pain point.
, with a rise in owners reporting uncertainty about 'whether it is a good time to expand' being the main driver.){kind=link}