A drop in small business confidence in September has renewed business concerns about inflation, supply chains and employment issues. According to the latest report from the National Federation of Independent Business (NFIB), the Small Business Optimism Index fell 2 points to 98.8, marking the first decline in three months. However, this is still higher than the survey’s 52-year average of 98.
The report also said the uncertainty index rose seven points to 100, the fourth highest reading in the past 50 years.
“Optimism among small business owners declined in September,” said Bill Dunkelberg, NFIB chief economist. «While most owners rate their businesses as currently healthy, they must manage increasing inflationary pressures, slowing sales expectations, and ongoing labor market challenges. Despite heightened uncertainty, small business owners remain resilient as they seek to better understand how policy changes will impact their operations.»
For many entrepreneurs, inflation remains a constant headache. Inflation was cited by 14% of owners as their most important issue (up three points from August), while high input costs and supply chain issues were causing concern. Nearly a third (31%) of owners say they plan to increase prices in the next three months, indicating cost pressures are not easing.
Supply chain problems also worsened, with 64% of small business owners reporting disruptions in September, a 10-point increase from the previous month. Inventory levels also changed dramatically, with the number of owners who thought their inventory was “too low” falling 7 points, the largest monthly decline in the survey’s history.
Despite these challenges, small business owners reported increased profits, with actual revenue changes reaching their highest level since December 2021. A net negative 16% reported a decline in revenue, a modest improvement that suggests companies are adapting to higher costs through price adjustments or efficiency improvements.
Recruitment continues to be mixed. 18% of owners cited labor quality as their biggest concern, and the most frequently cited issue was related to taxes. About 32% of small business owners reported job openings they could not fill, unchanged from August. 88% of people hiring or attempting to hire say they find few or no qualified candidates. Nonetheless, hiring plans rose slightly. 16% plan to create a new job in the next three months, the highest level since January.
Wages also remain under pressure. A net 31% of small business owners reported a compensation increase, with 19% planning an additional increase in the next three months. Labor costs were ranked as the most pressing issue for 11% of owners, up 3 points from August.
Investment activity has been steady, with 56% of small business owners making capital expenditures in the past six months. The majority of the expenditure was on equipment, vehicles and facility improvements. However, only 21% plan future capital expenditures. These are historically weak numbers and suggest caution in the coming months.
Loan costs are also rising. The proportion of owners paying high interest rates increased to 7%, and the average short-term loan interest rate reached 8.8%. More owners are reporting difficulties securing credit, a sign that their financial circumstances may be straining, putting growth plans under pressure.
When asked about the overall health of their business, 11% of owners said it was “excellent,” 57% said it was “good,” and 27% said their business was “fair.” Only 4% rated the health of their business as “poor.”
Taxes continue to be an important issue, with 18% of owners citing them as their biggest problem. Government regulations and bureaucracy were lowered to 6%, while poor sales (10%) and competition from large corporations (5%) remained stable.
Overall, the report demonstrates the cautious resilience of small and medium-sized businesses in the face of rising costs, ongoing labor shortages and uncertainty about future policies. Still, many are optimistic that the situation can improve due to stable demand and clearer economic signals.
The full NFIB report is available on the organization’s website ( here.
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