The NFIB Small Business Optimism Index increased by 1.7 points in July, reaching 100.3 and moving slightly above its 52-year average of 98. The improvement was driven mainly by more business owners reporting better conditions and seeing it as a good time to expand. However, the Uncertainty Index also rose sharply, up eight points from June to 97.
Labor quality remains a significant challenge for small businesses. Twenty-one percent of owners identified labor quality as their most pressing problem, which is an increase of five points from June and makes it the top concern among respondents.
“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.”
In July, there were signs that overall business health improved: 13% of respondents rated their business health as excellent (up five points), while 52% rated it as good (up three points). Reports of fair or poor business health decreased compared to June.
Poor sales became a growing concern for some, with 11% citing it as their main problem—the highest level since February 2021. Despite this, optimism about future conditions increased: the net percentage expecting better business conditions over the next six months rose by 14 points to a net 36%, well above historical averages.
Sixteen percent said July was a good time to expand their businesses—an increase from June—and planned capital outlays in the next six months ticked up one point to 22%. However, this figure remains below the long-term average.
Inflation concerns remained steady; eleven percent reported inflation as their most important problem—the same rate seen in June and marking the lowest level since September 2021.
Job openings continue to be difficult for many small firms to fill. A seasonally adjusted 33% reported unfilled job openings in July—down three points from June but still higher than historical averages. Of those hiring or trying to hire during June, most (84%) found few or no qualified applicants.
Plans for job creation saw a slight uptick: a net seasonally adjusted 14% plan new hires within three months. Labor costs were cited less frequently as a top issue than last month.
On compensation trends, fewer owners reported raising pay compared with June (net down six points), and fewer plan increases in coming months (net down two points).
Fifty-five percent made capital outlays over the past six months—a five-point rise from last month’s low reading—with investments going primarily into equipment purchases and vehicles.
Sales figures showed some weakness: net negative nine percent reported higher nominal sales over three months (down four points), while inventory gains remained unchanged at net negative eight percent.
Price increases appear likely to continue but at lower rates than previously seen; both plans for price hikes and reports of actual price increases fell compared with June’s numbers.
Profit trends did not improve: reports of positive profit trends stayed at net negative twenty-two percent. Lower profits were mostly blamed on weaker sales or rising material costs; higher profits came largely from increased sales volumes or seasonal factors.
Financing issues remained relatively minor but edged up slightly; only four percent named financing and interest rates as their biggest problem—though this was up one point from June—and regular borrowing hit historic lows among respondents.
Taxes ranked second among owner concerns at seventeen percent—two points lower than last month—while government regulations dropped one point to eight percent overall.
The data comes from NFIB’s ongoing Small Business Economic Trends survey series conducted monthly since 1986 using randomly selected members’ responses. The latest survey reflects conditions during July 2025.
