Small business optimism fell in September as uncertainty increased

Small business confidence slipped in September following three straight months of gains, according to the National Federation of Independent Business. The organization’s small business optimism index fell 2 points to 98.8, which is still higher than its 52-year average of 98..The decline was largely driven by fewer owners expecting better business conditions in the next six months and more seeing excess inventory. Meanwhile, the index tracking uncertainty jumped seven points to 100, its fourth-highest level in more than five decades, reflecting increasing unease about the economic outlook.Labor issues were central for small business owners. About 32 percent had unfilled job openings, unchanged from August, while 58 percent were hiring or trying to hire, up five points. Half of those said they had few or no qualified applicants. Labor quality and taxes tied as the most common issue, each cited by 18 percent of owners. A seasonally adjusted net 16 percent of owners expect to create new jobs in the next three months, up one point from August and its fourth straight monthly increase. “While openings are trending down, they remain above the historical average Inflation pressures also persisted. A net 24 percent of firms raised selling prices, and 31 percent plan further price increases in the coming months. Fourteen percent listed inflation as their biggest problem, up three points from August.Profit trends showed modest improvement, with the share of owners reporting lower earnings narrowing to -16 percent, its best reading since 2021. Credit conditions, however, tightened: A net 7 percent said their last loan was harder to obtain — the highest level of the year — and the average interest rate on short-term loans rose to 8.8 percent.While GDP growth and employment figures remained strong in September, NFIB Chief Economist Bill Dunkelberg said uncertainty surrounding federal policies and slowing consumer confidence continue to weigh on Main Street sentiment. “Uncertainty is very high,” he said, “and how all the moving parts come together is yet to be revealed.”Other report findings included:Fifty-six percent of small business owners made capital outlays in the last six months, the same as August. Of those, 42 percent spent on new equipment, 22 percent acquired vehicles and 14 percent improved or expanded facilities. Only 21 percent plan capital outlays in the next six months, also unchanged from August. A net -7 percent of owners had higher nominal sales in the past three months, up 2 points from August, as more firms saw falling sales than reported gains.