The National Federation of Independent Business (NFIB) Small Business Optimism Index increased by 0.5 points in August to 100.8, putting it nearly three points above the historical average of 98 from the past 52 years. Of the ten components that make up the index, four rose, four fell, and two remained unchanged. The primary driver behind this increase was a rise in expectations for higher real sales among small business owners.
The NFIB Uncertainty Index dropped by four points to 93 but continues to be higher than its historical average, largely due to decreased uncertainty around financing and planned capital expenditures.
Greg Moreland, Pennsylvania State Director for NFIB, commented on the latest results: “Small business owners are more optimistic following improved earnings and an expectation of higher sales coming out of the summer months. While optimism has improved, Pennsylvania small business owners continue to be concerned about state legislative proposals that would disrupt their confidence.”
Survey data showed improvements in overall business health assessments during August. Fourteen percent of respondents rated their business health as excellent—an increase of one point—and 54% rated it as good—up two points. The percentage reporting fair health declined by four points to 27%, while those rating their businesses as poor remained at 4%.
Labor quality persisted as the top concern for small business owners; 21% identified it as their single most important problem, matching July’s figure. In August, seasonally adjusted data showed that 32% of all owners reported job openings they could not fill—a one-point drop from July and the lowest level since July 2020.
Expectations for higher real sales volumes increased six points from July to a net positive reading of 12%. Owners who viewed inventory stocks as too low rose three points from July to a net zero percent in August.
Price pressures appear to be easing slightly: The share of owners raising average selling prices fell three points from July to a net total of 21%, marking this year’s lowest reading so far. Profit trend reports improved by three points but remained negative overall at -19%, which is still the best figure recorded since March 2023.
Short-term loan rates averaged at 8.1% in August—a decrease of 0.6 percentage points compared with July and representing the lowest level since May last year. Regular borrowing also declined; only 23% reported borrowing regularly—the lowest since November 2021.
As detailed in NFIB’s monthly jobs report, difficulty filling open positions remains pronounced within certain sectors such as construction (49% unfilled job openings), though this is down six points from July and eleven below last year’s levels—suggesting some softening in hiring demand within these industries.
A seasonally adjusted net fifteen percent plan to create new jobs over the next quarter—an increase for the third month running but still considered historically low.
Of those actively hiring or attempting to hire (53%), most (81%) said there were few or no qualified applicants available; specifically, twenty-six percent cited few qualified applicants (down three points), while seventeen percent noted none at all (down two).
Labor costs registered as an important issue for eight percent—a slight decline—while compensation increases were more common: Twenty-nine percent raised compensation recently (up two), and twenty percent plan further raises soon (up three).
Capital spending activity edged up marginally: Fifty-six percent made capital outlays during the prior six months (up one point). Spending focused primarily on equipment purchases (37%), vehicles (22%), facility improvements or expansions (17%), fixtures/furniture (13%), and property acquisitions for expansion purposes (5%).
Sales trends remained relatively stable with a net negative nine percent reporting higher nominal sales over recent months—the same result as in July. Inventory gains moved up slightly (+2) but continued trending negative overall (-6%).
Supply chain disruptions affected just over half (54%) of small businesses—a reduction of ten percentage points from July—with only three percent experiencing significant impact and forty-four percent now reporting no impact at all.
Looking ahead, fewer expect price hikes: A seasonally adjusted net twenty-six percent plan price increases over the next quarter—a decrease—and just twenty-one percent reported having raised prices recently, also down versus prior readings.
Inflation concerns held steady with eleven percent naming it their top operational challenge—the third consecutive month without change.
Among those seeing declining profits recently, weaker sales led reasons cited; rising material costs were second-most common cause followed by product/service pricing issues and labor costs. Conversely, those with better profits mostly credited stronger sales volumes or seasonal changes.
Only four percent identified financing/interest rates as their leading problem; loan accessibility became marginally easier compared with previous attempts for some respondents while others saw slightly higher interest rates on new loans.
Expectations about future business conditions dipped modestly: Thirty-four percent anticipate improvement—a two-point drop—and just fourteen percent said now is a good time to expand operations.
Taxes remain a major issue for seventeen percent—the second-highest ranking problem after labor quality—with government regulations increasing slightly in importance among respondents at nine percent.
NFIB has gathered these economic trend insights through quarterly surveys since late-1973 and monthly surveys since mid-1986 using randomly selected members nationwide; findings are released each month on schedule based on responses received during August.
