The Sconi

The NFIB Small Business Optimism Index increased by 1.7 points in July, reaching 100.3 and surpassing its 52-year average of 98. The main factors behind this rise were business owners’ improved views on business conditions and a greater sense that it is a good time to expand operations.

Despite the optimism, the Uncertainty Index also rose by eight points from June to 97, indicating ongoing concerns among small business owners. Labor quality was identified as the most significant problem by 21% of respondents, marking a five-point increase from June.

“Optimism rose slightly in July with owners reporting more positive expectations on business conditions and expansion opportunities,” said NFIB Chief Economist Bill Dunkelberg. “While uncertainty is still high, the next six months will hopefully offer business owners more clarity, especially as owners see the results of Congress making the 20% Small Business Deduction permanent and the final shape of trade policy. Meanwhile, labor quality has become the top issue on Main Street again.”

Luke Bacher, State Director for NFIB Wisconsin, noted local improvements: “Wisconsin’s small business landscape shows signs of improvement, with increased optimism about expansion opportunities,” he said. “Congress making the 20% small business tax deduction permanent helped boost confidence. However, owners are wary of ongoing regulatory challenges that could affect their growth.”

Survey data showed an uptick in overall business health assessments: 13% rated their businesses as excellent (up five points), while those rating their health as good climbed three points to 52%. Those describing their situation as fair or poor both declined.

Poor sales emerged as a growing concern for some businesses; 11% cited it as their top problem—an increase and the highest since February 2021. Owners expecting better business conditions over the next six months rose sharply to a net 36%, while those who felt it was a good time to expand reached a seasonally adjusted rate of 16%, up five points from June.

Inflation continued to be an issue for some; eleven percent named it as their main operating problem—the same rate recorded in June.

Expectations for higher real sales volumes slipped one point to a net seasonally adjusted six percent. Plans for capital outlays edged up one point but remain below historical norms at twenty-two percent (seasonally adjusted).

Hiring remains challenging for many small firms: Thirty-three percent reported unfilled job openings—down three points from June but still above long-term averages—and most employers seeking workers found few or no qualified applicants.

Other findings show nine percent identified labor costs as their biggest challenge (down one point). Compensation increases are slowing; net plans to raise compensation fell two points while actual compensation hikes dropped six points compared with June.

Investment activity picked up slightly; fifty-five percent reported capital outlays over six months—a rebound after recent lows—with spending focused mainly on equipment, vehicles, facilities improvements or expansions, fixtures/furniture upgrades, and acquisitions of new buildings or land.

Sales performance remained mixed: A net negative nine percent reported higher nominal sales over three months (down four points), while inventory gains stayed flat at negative eight percent seasonally adjusted.

Price changes suggest continued inflationary pressures: A net twenty-eight percent plan price increases (down four points), though this remains well above historic levels. Actual price hikes were less common than in previous months.

Profit trends did not improve overall; reports of positive profit trends held steady at a net negative twenty-two percent seasonally adjusted. Among those reporting lower profits, weaker sales were cited most often.

Financing difficulties were mentioned by four percent (up one point). Regular borrowing rates remain historically low at twenty-five percent among all owners surveyed; only modest shifts were seen in loan accessibility and interest rates paid compared with prior periods.

Taxes dropped two percentage points but remain the second-highest concern at seventeen percent among respondents; government regulations and red tape followed at eight percent. Six percent pointed to competition from larger companies as their primary issue—a slight decrease from last month’s figure.

The NFIB Research Center has been collecting these economic trend data through regular surveys since 1973 and monthly since 1986 using randomly selected members' responses each month.