Small Business Optimism Recedes in February

The NFIB Small Business Optimism Index fell by 2.1 points in February to 100.7. This is the fourth consecutive month above the 51-year average of 98 and is 4.4 points below its most recent peak of 105.1 in December. The Uncertainty Index rose four points to 104 – the second highest recorded reading.

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“Uncertainty is high and rising on Main Street and for many reasons,” said NFIB Chief Economist Bill Dunkelberg. “Those small business owners expecting better business conditions in the next six months dropped and the percent viewing the current period as a good time to expand fell, but remains well above where it was in the fall. Inflation remains a major problem, ranked second behind the top problem, labor quality.”

State-specific data is unavailable, but NFIB State Director Hunter Loggins said, “Small business optimism may be above historical averages, but owners remain cautious about where things are going. This uncertainty, when combined with rising costs and a lack of qualified job candidates, makes it hard to own and operate a small business.”

Key findings of the national survey include:

• The net percent of owners expecting the economy to improve fell ten points from January to a net 37% (seasonally adjusted).
• Twelve percent (seasonally adjusted) of owners reported that it is a good time to expand their business, down five points from January. This is the largest monthly decrease since April 2020.
• Sixteen percent of owners reported that inflation was their single most important problem in operating their business, down two points from January and now just below labor quality as the top issue. The last time it was this low was in October 2021.
• The net percent of owners raising average selling prices rose 10 points from January to a net 32% (seasonally adjusted). This is the largest monthly increase since April 2021, and the third highest in the survey’s history.
• Seasonally adjusted, a net 29% plan price hikes in the next three months, up three points from January and the highest reading in 11 months.
• Labor costs reported as the single most important problem for business owners rose three points to 12%, only one point below the survey’s highest reading of 13% reached in December 2021.
• The frequency of reports of positive profit trends was a net negative 24% (seasonally adjusted), up one point from January.
• A net 2% of owners reported that their last loan was harder to get than in previous attempts (down one point). The last time this reading was this low was in February 2022.
• Twenty-four percent of all owners reported borrowing on a regular basis, down three points from January and the lowest since May 2022.

This month, NFIB introduced a new question to the survey to better understand how small business owners evaluated the overall health of their business. Eleven percent of owners reported the health of their business as excellent, 55% reported it as good, 27% reported it as okay, and 6% reported bad.

As reported in NFIB’s monthly jobs report, a seasonally adjusted 38% of all small business owners reported job openings they could not fill in February, up three points from January and the highest reading since August 2024. Of the 53% of owners hiring or trying to hire in January, 89% reported few or no qualified applicants for the positions they were trying to fill.

A seasonally adjusted net 15% of owners plan to create new jobs in the next three months, down three points from January.

The percent of small business owners reporting labor quality as the single most important problem for business rose one point from January to 19%, surpassing inflation as the top issue. Labor costs reported as the single most important problem for business owners rose three points in February to 12%, only one point below the highest reading of 13% reached in December 2021.

Seasonally adjusted, a net 33% reported raising compensation, unchanged from January. A seasonally adjusted net 18% plan to raise compensation in the next three months, down two points from January.

Fifty-eight percent of owners reported capital outlays in the last six months, unchanged from January. Of those making expenditures, 37% reported spending on new equipment, 30% acquired vehicles, and 13% improved or expanded facilities. Twelve percent spent money on new fixtures and furniture and 5% acquired new buildings or land for expansion. Nineteen percent (seasonally adjusted) plan capital outlays in the next six months, down one point from January.

A net negative 12% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down two points from January. The net percent of owners expecting higher real sales volumes fell six points from January to a net 14% (seasonally adjusted). This is the second consecutive month real sales expectations declined after surging from recession levels after the election.

The net percent of owners reporting inventory gains was unchanged from January at a net negative 6%, seasonally adjusted. Not seasonally adjusted, 8% reported increases in stocks and 19% reported reductions.

A net negative 5% (seasonally adjusted) of owners viewed current inventory stocks as “too low” in February, down four points from January. A net negative 1% (seasonally adjusted) of owners plan inventory investment in the coming months, down one point from January.

The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. Survey respondents are randomly drawn from NFIB’s membership. The report is released on the second Tuesday of each month. This survey was conducted in February 2025.

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For over 80 years, NFIB has been advocating on behalf of America’s small and independent business owners, both in Washington, D.C., and in all 50 state capitals. NFIB is nonprofit, nonpartisan, and member-driven. Since our founding in 1943, NFIB has been exclusively dedicated to small and independent businesses, and remains so today. For more information, please visit nfib.com.