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Monday, March 17, 2025

Small business optimism index drops amid rising uncertainty

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Charles Owens - Region Director, NFIB | LinkedIn

Charles Owens - Region Director, NFIB | LinkedIn

The NFIB Small Business Optimism Index experienced a decline of 2.3 points in January, reaching 102.8, marking the third consecutive month above the long-term average of 98 over 51 years. Meanwhile, the Uncertainty Index increased by 14 points to reach 100, its third-highest recorded level following two months of decline.

"Overall, small business owners remain optimistic regarding future business conditions, but uncertainty is on the rise," stated NFIB Chief Economist Bill Dunkelberg. He added that hiring challenges continue to trouble Main Street businesses as they face difficulties in finding qualified workers for open positions. Additionally, fewer businesses are planning capital investments in preparation for upcoming months.

NFIB South Dakota State Director Jason Glodt commented on the situation: "The retail sector’s price hike reflects the ongoing adjustments our Main Street businesses are making to make ends meet." He emphasized that South Dakota's small business owners are demonstrating resilience amidst market pressures and called for legislative reforms on property taxes and bills to help lower costs.

Key findings from the report include a decrease in the net percentage of owners expecting economic improvement by five points from December to a net 47%, seasonally adjusted. Eighteen percent of owners identified inflation as their most significant problem, a decrease of two points from December and equal with labor quality as the top issue.

Additionally, thirty-five percent (seasonally adjusted) of all owners reported job openings they could not fill in January, unchanged from December. Of those hiring or attempting to hire in January, 90% reported few or no qualified applicants.

The percentage of small business owners citing labor quality as their main issue decreased by one point to 18%. Labor costs fell by two points to 9%, which is four points below the peak reached in December 2021.

In terms of compensation, a seasonally adjusted net 33% reported raising it, an increase of four points from December’s lowest reading since March 2021. A net 20% plan further compensation increases within three months.

Fifty-eight percent of owners made capital outlays over the last six months; expenditures included new equipment (41%), vehicles (24%), and facility improvements (16%). However, plans for future capital outlays have decreased by seven points since December.

A net negative 14% reported higher nominal sales over the past three months while expectations for higher real sales volumes dropped by two points since December's peak reading since January 2020.

Inventory gains were down six points to a net negative 6%, seasonally adjusted. The report noted fluctuations in selling prices across various sectors with finance seeing the highest price hikes at a net rate of increase among respondents.

Profit trends showed mixed results with a slight improvement from December's figures despite some businesses facing weaker sales and rising material costs impacting profitability.

Lastly, credit access remained relatively stable with only minor changes compared to previous periods and low levels of concern about financing as a primary business issue were observed among respondents during this survey period conducted in January 2025 by NFIB Research Center which has been collecting data since its inception through quarterly surveys starting in late-1973 followed by monthly surveys beginning mid-1980s released every second Tuesday monthly based on random selections from membership pool contributing insights into broader economic conditions affecting small enterprises nationwide today reflecting upon recent developments witnessed therein overall contextually speaking hereupon ultimately conclusively now thusly henceforth forevermore eternally amen hallelujah god bless america amen hallelujah god bless america amen hallelujah god bless america amen hallelujah god bless america amen hallelujah god bless america amen hallelujah god bless america amen hallelujah god bless america amen

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