Great Lakes Wire

The National Federation of Independent Business (NFIB) has reported an increase in small business optimism for May 2025. The NFIB Small Business Optimism Index rose by three points to 98.8, surpassing the 51-year average of 98. This rise was largely driven by improved expectations for business conditions and sales.

However, the Uncertainty Index also increased by two points to 94, indicating ongoing concerns among small business owners. Taxes emerged as the most significant issue, with 18% of owners citing it as their primary concern—an increase from April and a ranking not seen since December 2020.

NFIB Chief Economist Bill Dunkelberg commented on the findings: “Although optimism recovered slightly in May, uncertainty is still high among small business owners.” He noted that while positive expectations were reported regarding business conditions and sales growth, economic uncertainties remain unresolved.

Amanda Fisher, NFIB State Director for Michigan, highlighted specific regional concerns: “While optimism has gone up, Michigan’s small businesses continue to be concerned about labor quality and tax increases.” She suggested that Congress could alleviate some concerns by making the Small Business Deduction permanent.

Key survey findings include a net increase in inventory stocks being viewed as "too low," rising seven points from April to its highest level since August 2022. Expectations for better business conditions rose by ten points to a net 25%, while higher real sales volumes saw an eleven-point increase to a net 10%.

Capital outlays are planned by 22% of respondents over the next six months—a four-point rise—and labor quality remains a significant issue despite falling three points to 16%. Inflation was consistently reported as a major problem by 14% of owners.

Job openings remained challenging to fill for many businesses; about one-third of all small business owners reported unfilled positions in May. Of those hiring or attempting to hire, most encountered few or no qualified applicants.

In terms of financial outlooks, labor costs increased slightly as a primary concern at nine percent. Compensation adjustments were noted with fewer owners raising compensation compared to April but plans for future raises increased slightly.

Investment activities showed mixed results; while capital outlays decreased slightly over the past six months, spending on new equipment remained notable at forty percent among those who made expenditures.

The report also noted that poor sales continued as a persistent problem at nine percent for five consecutive months. Additionally, financing issues saw minor changes with borrowing activity decreasing slightly and interest rates becoming more challenging for some businesses.

Overall health ratings varied among respondents with slight fluctuations in reports of excellent or good conditions versus fair or poor ones. Expansion plans showed modest improvement yet remained historically low according to seasonal adjustments.

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 using randomly selected members' responses each month—this particular survey being conducted during May 2025.