September reported renewed concerns among entrepreneurs for small business confidence, inflation, supply chains and hiring. According to the latest report from the Federation of Independent Business (NFIB), the small business optimism index fell two points to 98.8 – the first drop in three months – although it remained above the survey’s 52-year average of 98.
The report also noted that the uncertainty index rose seven points, the fourth highest reading in five decades.
“Optimism among small business owners declined in September,” said NFIB Chief Economist Bill Dunkelberg. “While most owners currently rate their business as healthy, they are having to manage rising inflationary pressures, slower sales expectations and ongoing labor market challenges.
For many entrepreneurs, inflation remains a constant headache. Fourteen percent of owners identified inflation as their most significant problem—up three points from August—along with higher input costs and problems with chain concerns. Nearly a third (31%) of owners said they plan to raise prices in the next three months, suggesting cost pressures have not eased.
Supply chain problems also worsened, with 64% of small business owners reporting cross-sections in September, a 10-point jump from the previous month. Inventory levels also fluctuated sharply, with housewives viewing their stocks as “very low” by seven points, the largest monthly decline in the survey’s history.
Despite these challenges, small business owners reported a net negative 16% change in real earnings, the highest level since December 2021, indicating that businesses are adjusting to higher costs through price adjustments or improved efficiency.
Recruitment continues to be a mixed picture. Eighteen percent of owners cited labor quality as their top concern, tied with taxes as the most cited problem. About 32% of small business owners reported unfilled jobs as of August. Of those hiring or trying to hire, 88% said they found applicants with few or no qualifications. Still, plans to create new jobs in the next three months, at the highest level since January, are still working plans.
Wages also remain under pressure. 31% of small business owners reported a compensation increase and 19% plan to increase their compensation in the next three months. Labor costs ranked as the most pressing issue for 11% of those who scored three points from August.
Investment activity was steady, with 56% of small business owners making capital expenditures in the past six months. Most of these costs went to equipment, vehicles and the advancement of the facility. However, only 21% future capital expenditure – a historically weak number that suggests caution in the coming months.
Debt costs are also climbing. The share of owner occupiers paying higher interest rates rose to 7% with average short-term loan rates hitting 7.8%. More entrepreneurs are finding it difficult to secure credit, a sign that tighter financial conditions are squeezing growth plans.
When asked about the overall health of their business, 11% of owners said it was “excellent” and 57% said it was “good”: 27% described their business as “fair.” Only 4% rated occupational health as “poor”.
Taxes continue to be a significant concern as their biggest problem with 18% of owners. Government regulations and red tape remained steady at 6%, weak sales (10%) and competition from larger businesses (5%).
Overall, the report paints a picture of cautious resilience among small businesses — a group facing rising costs, persistent labor shortages and uncertainty over future policy. Still, many remain optimistic that conditions could improve with steady demand and clearer economic signals.
The full NFIB report is available on the Organization’s website here.
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