The NFIB Small Business Optimism Index increased by 1.7 points in July, reaching 100.3, which is slightly above its 52-year average of 98. The rise was mainly driven by small business owners reporting improved business conditions and more seeing it as a good time to expand their operations. However, the Uncertainty Index also rose, increasing by eight points from June to reach 97.
Labor quality remains a key concern for many small businesses. Twenty-one percent of owners cited labor quality as their single most important problem, an increase of five points from June and now the top issue reported.
“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.”
NFIB State Director Michael Smith added: “Although finding qualified applicants remains a real challenge, there’s no doubt that making the 20% Small Business Deduction permanent has played a significant role in boosting Main Street’s optimism. Ahead of the special session, lawmakers should prepare to reject any mandate or tax hike on Colorado’s small business owners and promote greater economic opportunity here in our state.”
State-specific data was not available for this report.
Key findings show that overall business health improved during July: 13% rated their business health as excellent (up five points), while 52% said it was good (up three points). Those rating their situation as fair fell to 31%, and only 4% reported poor health.
The percentage of owners identifying poor sales as their main problem rose one point to 11%, marking its highest level since February 2021. Expectations for better business conditions climbed significantly; a net 36% expected improvement over the next six months—a figure well above historical averages.
Sixteen percent said it was a good time to expand their businesses (up five points from June). Eleven percent named inflation as their primary operating challenge—unchanged from June—while expectations for higher real sales volumes dropped one point to a net six percent.
Plans for capital outlays edged up slightly; twenty-two percent plan investments in the next half year but this remains below long-term averages.
According to NFIB’s monthly jobs report, thirty-three percent had job openings they could not fill—down three points from June but still above historical norms. Of those hiring or trying to hire in June, eighty-four percent found few or no qualified applicants. A seasonally adjusted net fourteen percent plan new job creation within three months.
Reports of labor costs being the main issue fell by one point to nine percent since June. Compensation increases were less common: twenty-seven percent raised pay (down six points), while seventeen percent plan further raises soon (down two).
Fifty-five percent made capital expenditures recently—the highest since August 2020—with spending focused on equipment (38%), vehicles (23%), facilities improvements or expansions (15%), fixtures/furniture (12%), and buildings/land acquisition (5%).
A net negative nine percent reported higher nominal sales over three months—four points lower than June—and inventory gains stayed at a net negative eight percent.
Price increases are expected by twenty-eight percent—a decrease from last month—but remain above average levels historically. Actual price hikes were reported by twenty-four percent; twelve percent saw lower prices while thirty-seven saw increases.
Profit trends remained weak at a net negative twenty-two percent overall; among those with falling profits, weaker sales were most often blamed followed by material costs and labor expenses.
Four percent cited financing costs as their biggest concern—a slight increase—and regular borrowing declined marginally with only twenty-five percent doing so regularly. Loan access appeared slightly easier compared with previous periods.
Seventeen percent listed taxes as their primary problem—a drop from last month—making it second overall behind labor quality concerns. Government regulations troubled eight percent while competition from large firms concerned six percent of respondents.
The NFIB Research Center has gathered these economic trend data through quarterly surveys since late-1973 and monthly surveys since 1986 using random samples drawn from its membership base.
