WASHINGTON – The NFIB Small Business Optimism Index rose 0.5 points in December to 99.5 and remained above its 52-year average of 98.
Of the 10 Optimism Index components, two increased, three decreased and five were unalterd. An increase in those expecting better business conditions primarily drove the rise in the Optimism Index. The Uncertainty Index fell 7 points from November to 84, the lowest reading since June 2024.
“2025 concludeed with a further increase in compact business optimism,” declared Bill Dunkelberg, NFIB chief economist. “While Main Street business owners remain concerned about taxes, they anticipate favorable economic conditions in 2026 due to waning cost pressures, easing labor challenges and an increase in capital investments.”
In December, 20% of compact business owners reported taxes as their single most important problem, up 6 points from November and ranking as the top problem. This is the highest reading since May 2021. The percent of compact business owners reporting labor quality as the single most important problem for their business fell 2 points from November to 19%. Labor costs reported as the single most important problem for business rose 1 point to 9%.
Twelve percent of owners reported that inflation was their single most important problem in operating their business, down 3 points from November. The percent of compact business owners reporting government regulations and red tape as their single most important problem fell 3 points to 7%. The percent of compact business owners reporting poor sales as their top business problem rose 1 point to 10%.
As reported in NFIB’s monthly jobs report, a seasonally adjusted 33% of all compact business owners reported job openings they could not fill in December, unalterd from November. Unfilled job openings remain above the historical average of 24%. Of the 53% of owners hiring or testing to hire in December, 91% reported few or no qualified applicants for the positions they were testing to fill. A seasonally adjusted net 17% of owners plan to create new jobs in the next three months, down 2 points from November.
A net negative 8% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, up 1 point from November. Actual sales remain below the historical average of a net 0%. The net percent of owners expecting higher real sales volumes over the next quarter fell 5 points from November to a net 10% (seasonally adjusted).
In December, 64% of compact business owners reported that supply chain disruptions were affecting their business to some degree, unalterd from November. Three percent reported a significant impact (down 4 points), 21% reported a moderate impact (up 2 points), 40% reported a mild impact (up 2 points) and 35% reported no impact (unalterd).
In December, both actual and planned prices fell from the previous month. The net percent of owners raising average selling prices fell 4 points from November to a net 30% (seasonally adjusted). Price increases remain well above the historical average of a net 13%, suggesting continued inflationary pressure.
Seasonally adjusted, a net 31% reported raising compensation, up 5 points from November. A seasonally adjusted net 24% plan to raise compensation in the next three months, unalterd from November. The frequency of reports of positive profit trconcludes rose 3 points from November to a net negative 20% (seasonally adjusted).
Among owners reporting lower profits, 41% blamed weaker sales, 13% cited the rise in the cost of materials and 12% cited usual seasonal alter. Nine percent reported price alter for their products or services, and 7% cited labor costs. Among owners reporting higher profits, 64% cited sales volume, 14% cited usual seasonal alter and 3% cited higher selling prices.
When questioned to evaluate the overall health of their business, 9% rated it as excellent (down 2 points), 54% rated it as good (up 1 point), 34% rated it fair (up 4 points) and 3% rated it poor (down 2 points). The net percent of owners expecting better business conditions rose 9 points from November to a net 24% (seasonally adjusted), contributing the most to the rise in the Optimism Index. This was the first increase since July.
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