Optimism index drops as uncertainty rises
The National Federation of Independent Business (NFIB) reported a significant drop in small-business sentiment in September. Its Optimism Index fell 2.0 points to 98.8, marking the first decline in three months. Business owners cited unfavorable operating conditions over the next six months as a growing concern.
The report comes amid a government shutdown that has delayed critical economic data. With official employment statistics for September on hold, investors and policymakers are relying more on private surveys to gauge the health of the economy.
Uncertainty hits highest levels in decades
The NFIB’s Uncertainty Index rose by 7 points to reach 100 — the fourth-highest level in more than 51 years. NFIB Chief Economist Bill Dunkelberg linked the surge in uncertainty to ongoing policy shifts under the Trump administration, stating that while growth remains solid, it is increasingly driven by AI-related investments rather than Main Street activity.
Just 23% of business owners expect improved conditions in the coming half-year, a sharp 11-point drop. Concerns include rising beef prices, higher taxes, elevated health insurance costs, and clients delaying services due to economic unease.
Tariffs and inflation pressure operating margins
President Trump’s renewed tariff threats — including a proposed 100% duty on Chinese imports — are adding to inflationary pressures. Fourteen percent of business owners cited inflation as their biggest operational problem, up three points from August.
Price hikes are becoming more common. Twenty-four percent of businesses reported raising prices, and 31% plan to do so in the next three months. The NFIB highlighted that these figures remain well above the long-term average of a net 13%.
Supply chain disruptions are also mounting, with more firms citing delays and bottlenecks. Declining inflation-adjusted sales and rising inventory levels signal broader economic risk.
Spending concentrated among high-income groups
Dunkelberg noted that robust consumer spending is largely coming from higher-income households benefiting from a strong stock market. This uneven growth may not be enough to offset growing headwinds for small businesses, especially those reliant on middle- and lower-income consumers.
With rising input costs, policy uncertainty, and weaker sales expectations, small businesses are facing a challenging environment — even as large-cap stocks continue to soar.
