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Wednesday, January 15, 2025

NFIB reports surge in small business optimism amid positive economic outlook

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Joe Knilans Committed to Driving Results Through Engaging Leadership | LinkedIn

Joe Knilans Committed to Driving Results Through Engaging Leadership | LinkedIn

The NFIB Small Business Optimism Index has seen a notable rise, increasing by 3.4 points in December to reach 105.1. This marks the second consecutive month that the index has surpassed the 51-year average of 98, achieving its highest level since October 2018. Among the ten components of the Optimism Index, seven showed increases, two decreased, and one remained unchanged. The Uncertainty Index saw a decline of 12 points in December to settle at 86.

"Optimism on Main Street continues to grow with the improved economic outlook following the election," stated NFIB Chief Economist Bill Dunkelberg. "Small business owners feel more certain and hopeful about the economic agenda of the new administration. Expectations for economic growth, lower inflation, and positive business conditions have increased in anticipation of pro-business policies and legislation in the new year."

Bill G. Smith, NFIB Wisconsin State Director, commented on local developments: "Wisconsin’s manufacturing and retail sectors are showing renewed confidence following this report. The fact that 37% of businesses investing in new equipment aligns with what we’re seeing in our state’s small business community." He emphasized that "Wisconsin’s Main Street is looking to grow, and state lawmakers must pass pro-small business policies if they want this trend to continue."

Key findings from the report include an increase in net percent of owners expecting economic improvement by 16 points from November to a net 52%, which is seasonally adjusted and represents the highest level since late 1983. Additionally, there was a six-point rise in small business owners believing it is a good time for expansion, reaching 20% seasonally adjusted—the highest reading since February 2020.

The report also noted an eight-point increase in owners expecting higher real sales volumes to a net 22%, marking another high since January 2020. Inventory investment plans among owners rose five points from November to a net six percent (seasonally adjusted), indicating optimism about future sales.

However, challenges remain as twenty percent of owners reported inflation as their primary operational problem due to higher input and labor costs—unchanged from November—and leading labor quality issues by one point.

In terms of employment challenges, a seasonally adjusted thirty-five percent of small business owners reported job openings they could not fill in December—down slightly from November—with many reporting few or no qualified applicants.

On capital outlays over recent months, fifty-six percent reported expenditures—a two-point increase from November—with significant investments made into new equipment and vehicles among other areas.

Profit trends showed mixed results; while some businesses cited weaker sales as reasons for lower profits (35%), others credited increased sales volumes for higher profits (51%).

Finally, financing needs appeared mostly satisfied with only two percent reporting unmet borrowing requirements while twenty-four percent had all credit needs met.

The NFIB Research Center has been collecting data on Small Business Economic Trends through quarterly surveys since late-1973 and monthly surveys since mid-1986 with respondents randomly drawn from NFIB's membership base.

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