The National Federation of Independent Business said its Small Business Optimism Index fell 0.6 points to 95.3 in May, the weakest reading since October 2024 and the third straight month below the metric's 52-year average of 98.0, according to data the group released Tuesday. The NFIB's uncertainty index rose three points to 91, more than 23 points above its long-run average of 68.
Fuel costs were a central pressure point for small business owners in May. "More small business owners are struggling with significant and unpredictable hikes in fuel prices, which are more challenging for small businesses to pass on to their customers compared to their larger corporate competitors," NFIB Chief Economist Bill Dunkelberg said in a statement.
Price pressures intensified across the board. Among owners surveyed, a net 36% said they had already raised their average selling prices — a six-point jump from the prior month, a figure the NFIB noted was well above the 13% historical average and the highest such share recorded since March 2023. Looking ahead, 34% of owners indicated they intend to lift prices within the next three months — up seven points from April and a level not seen since July 2022. Inflation's prominence as a pain point continued to grow, with 18% of respondents — two points more than in April and the highest share since December 2024 — identifying it as their top business concern; only taxes ranked higher.
Supply chain strain spread more broadly, as six points more owners than in April — 70% in total — said disruptions had touched their operations in some way, with most of that movement coming from the previously unaffected segment shifting into mild or moderate disruption categories.
The labor outlook also weakened. On hiring, just 9% of owners on a seasonally adjusted basis said they intend to add staff over the coming three months — a four-point retreat from April that pushed the reading to its weakest point since May 2020 and below the 11% long-run average. Positions owners said they were unable to fill similarly reached a six-year low, declining five points to 29%. Labor costs, meanwhile, hit a record high in the survey's history, with 14% of owners identifying it as their single most important problem, up five points from April.
Capital investment appetite also faded: at 16% of owners intending to spend on capital in the coming months, the figure dipped one point from April to match a level not recorded since March 2009.
The NFIB noted that the economy appears increasingly divided, with AI-related investment lifting one segment while rising energy costs and uncertainty weigh on the other. The NFIB's statement flagged the Iran conflict's disruption to global oil markets as a central source of the elevated uncertainty, quoting its own commentary: "Uncertainty is the enemy of growth and investment, and it is high."