Small Business Optimism Hits New High as Economic Conditions Improve

Amid changing economic winds, small business optimism is showing signs of resurgence. The NFIB Small Business Optimism Index climbed to 99.5 in December—0.5 points higher than November, and above its 52-year average of 98. This uptick reflects a growing belief among business owners that better conditions lie ahead, driven primarily by falling cost pressures and an improved outlook for capital investments.

“2025 ended with a further increase in small business optimism,” stated NFIB Chief Economist Bill Dunkelberg. “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.”

Key findings from the NFIB survey indicate mixed signals, but several trends stand out that warrant attention from small business owners.

Rising Optimism and Challenges Ahead

One of the most notable aspects of the December report is the increase in the net percent of owners expecting better business conditions, which rose 9 points from November to a net 24%. This change marks the first increase since July, suggesting a shift in mindset after a prolonged period of uncertainty. However, while optimism is increasing, taxes have emerged as a pressing concern for many. Twenty percent of survey respondents cited taxes as their most significant problem, an increase of 6 points from November and the highest level since May 2021.

Inflation and supply chain issues remain crucial considerations. While the net percent of owners raising average selling prices fell to a net 30%, inflationary pressures persist above historical averages, compelling businesses to remain vigilant about pricing strategies. Moreover, 64% of small business owners reported supply chain disruptions affecting their operations, highlighting ongoing challenges in getting products and materials.

What’s in Store for Hiring and Compensation?

In December, a seasonally adjusted 33% of small business owners reported having unfilled job openings, unchanged from November, but still above the historical average. Of those hiring, a staggering 91% reported difficulty finding qualified applicants, emphasizing the ongoing labor shortage that small businesses face.

Despite these challenges, there’s a positive shift in compensation trends. A net 31% of business owners reported raising compensation, up 5 points from November. However, plans to continue hiring present mixed forecasts, as only a net 17% of owners plan to create new jobs in the next three months, a slight decline from the previous month.

Capital Investments and Future Prospects

A promising sign is the increase in capital expenditures. Fifty-six percent of small business owners reported spending on equipment and other improvements, up 4 points from November. However, future plans for capital outlays show some caution; only 19% expressed intentions to invest in capital over the next six months. This may reflect broader uncertainties about sustained economic growth.

Navigating a Complex Landscape

Small business owners face a challenging landscape shaped by regulatory complexities, rising taxes, and labor shortages. Dunkelberg noted this increasing trepidation around tax issues while simultaneously highlighting a cautious optimism for 2026 fueled by potential improvements in economic conditions.

Owners should keep a pulse on market dynamics as they navigate their strategies moving into the new year. The increasing costs associated with labor and materials, along with the tax landscape, can exert pressure on profit margins. Yet, with rising optimism, many small businesses may find opportunities to invest in their operations and adapt to changing consumer needs.

For more detailed insights, the NFIB has launched the “Small Business by the Numbers” podcast, which delves deeper into how economic conditions affect small businesses across the nation. Co-hosted by NFIB’s Holly Wade and Peter Hansen, this podcast could serve as a valuable resource for small business owners seeking to understand the ever-evolving economic climate.

As 2026 approaches, small business owners may find a landscape rife with challenges but also ripe with opportunities for those willing to adapt and plan strategically. For further information, the full NFIB press release is available here.

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This article, "Small Business Optimism Hits New High as Economic Conditions Improve" was first published on Small Business Trends

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