Small business optimism in the United States surged in May, reaching its highest level in 18 months, according to the latest report from the National Federation of Independent Business (NFIB). The NFIB Small Business Optimism Index rose three points to 98.8, surpassing its 51-year historical average and signaling renewed confidence among America’s small business owners.
The rebound in sentiment was largely fueled by stronger expectations for future business conditions and rising hopes for improved sales. The share of business owners expecting better conditions in the coming months increased significantly, while the percentage anticipating higher real sales volumes also jumped—both signs of growing optimism despite a challenging macroeconomic backdrop.
Increased access to credit also contributed to the uptick. Only 4% of small business owners reported more difficulty obtaining financing compared to previous months, a slight improvement that suggests stabilization in lending conditions. With interest rates holding steady, more businesses are finding it viable to seek loans for expansion and operations. Meanwhile, seven percent reported paying higher loan rates, but the overall trend points toward improved financial accessibility.
The NFIB report noted a rise in capital spending plans, with 22% of small businesses intending to make capital outlays in the next six months—the highest reading so far this year. This suggests that more businesses are preparing to invest in equipment, technology, or property upgrades, indicating growing confidence in long-term economic prospects.
However, the report also underscored persistent challenges. The NFIB Uncertainty Index climbed two points to 94, highlighting ongoing concerns over inflation, tax policy, and labor shortages. While optimism is trending upward, many businesses remain wary of policy changes and external pressures that could derail recovery.
Labor market conditions remain tight. About 34% of business owners reported having job openings they could not fill, mirroring April’s level and signaling continued difficulty in finding qualified workers. Nevertheless, hiring intentions improved slightly, with 12% of firms planning to create new jobs in the coming quarter. Compensation plans were steady, with 26% of owners reporting recent wage increases and 20% planning to raise pay in the near future.
Despite positive momentum in sales expectations, profitability remains a concern. A net 26% of respondents reported lower profits, citing weak sales and rising input costs as the primary culprits. Taxes also emerged as a growing burden, with 18% of small business owners naming it as their top concern—the highest level recorded since December 2020.
Inventory management posed mixed signals. While nominal sales were reportedly lower, only 1% of businesses indicated that their inventory levels were too low, the highest reading since August 2022. This suggests that while demand remains uncertain, businesses are cautiously optimistic about future stock needs.
NFIB Chief Economist Bill Dunkelberg emphasized the nuanced nature of the report, stating that although the rise in optimism is encouraging, the elevated uncertainty index reflects the cautious stance many small business owners continue to hold. “Although optimism recovered slightly in May, uncertainty is still high among small business owners,” he said.
In the broader context, this rebound in small business confidence is a timely indicator for policymakers and market observers. It suggests that Main Street businesses—long considered a bellwether for grassroots economic health—are feeling more hopeful about the months ahead. However, the fragility of the recovery is evident in the continued pressure from inflation, taxes, and hiring difficulties.
Looking ahead, the sustainability of this renewed confidence will depend on key economic variables, including consumer demand, interest rate policy, and regulatory clarity. As the second half of the year approaches, small businesses will be closely watching for signals that confirm whether the current upswing is part of a lasting recovery or a temporary reprieve.
