The National Federation of Independent Business reported Tuesday that its Small Business Optimism Index climbed 2.1 points in June to 97.4, just below the index's 52-year average of 98.0. The result exceeded the 95.7 reading economists had expected, according to The Wall Street Journal.
Despite the rebound in confidence, inflation concerns intensified. Twenty-one percent of small business owners identified inflation as their single most important business problem — up 3 points from May and the highest share since October 2024, the NFIB said. The share of owners reporting that they had raised average selling prices rose 2 points to 38%, the highest reading since January 2023 and the fourth consecutive monthly increase. The share planning to raise prices in the next three months eased 2 points to 32%.
The NFIB's uncertainty index shed 2 points to land at 89, a level that still towers over its historical average of 68. Cheaper fuel, linked to a short-lived ceasefire between the U.S. and Iran, appeared to underpin the brighter sentiment. The agreement broke down last week when commercial vessels were attacked in the Strait of Hormuz, setting off military strikes between Washington and Tehran, and pump prices have been climbing in the days since.
"Current economic conditions present small business owners with both encouraging developments and ongoing challenges," NFIB Chief Economist Bill Dunkelberg said in a statement. "Lower fuel costs provide welcome relief for businesses as well as consumers, with firms anticipating improved operating conditions over the next six months." Dunkelberg added that high interest rates and modest economic growth are causing owners to approach hiring and capital spending with caution.
The net share of owners expecting better business conditions over the next six months rose 10 points to a net 13%, improving for the first time this year, according to The Wall Street Journal.
On the labor market, the share of owners reporting job openings they could not fill rose 3 points to 32%, and the proportion planning to create new jobs in the next three months increased 2 points to 11%. Among those who attempted to hire in June, approximately half said they encountered few or no qualified candidates, a proportion not seen since September 2024. Several respondents cited the rising cost of living as a drag on worker availability; an Indiana farm operator wrote that "employees are struggling to find decent places to rent within their means," while a California retailer noted that "the high cost of housing makes it difficult to pay employees enough to live" in the state.
The June reading follows a three-month stretch of below-average readings in which the index fell to 95.3 in May, its weakest point since October 2024. Fuel costs were a central pressure point in May, and inflation's share as the top concern had been building, with 18% of owners naming it their single most important problem in May, up from 16% in April. Labor costs also hit a survey record high in May, with 14% of owners naming it their single most important problem.