U.S. small business confidence rose in December to its highest level since late 2018, as expectations for a more business-friendly environment under President-elect Donald Trump continued to boost sentiment. The National Federation of Independent Business (NFIB) reported that its optimism index rose 3.4 points to 105.1, following a historic monthly increase in November.
The index measures sentiment across key areas such as future sales, expansion plans and hiring intent, and found significant improvements in seven of the 10 components. Significantly, the proportion of companies expecting conditions to improve in the coming months rose by 16 points, reaching the highest level since the monthly survey began in 2002.
“Optimism on Main Street continues to grow as the economic outlook improves following the election,” said Bill Dunkelberg, chief economist at NFIB. “Small business owners feel more confident and hopeful about the new administration's economic policies.”
Uncertainty is reduced as owners look ahead.
Adding to the optimistic outlook, the NFIB's Uncertainty Index fell by 12 points in December, the largest two-month decline ever. The decline reflects a clearer policy direction in Washington after Republicans took control of the White House and Congress.
Sales expectations also improved, with the percentage of respondents expecting sales to increase by 8 points, reaching its highest level since early 2020. Many small businesses appear poised to expand, encouraged by hopes of lower taxes, less regulation and infrastructure spending. The next government.
While inflation remains a key concern for management, recent and planned price movements, even at high levels, suggest stabilization. Government data released later this week is expected to show a steady rise in consumer prices, further supporting the Federal Reserve's decision to maintain current interest rates.
Labor market and credit conditions show signs of stabilization
Labor issues, particularly the availability of qualified workers, remain a persistent problem for small and medium-sized businesses, but the latest data suggests some relief. Hiring appetite remains positive as managers look to take advantage of improving market conditions.
The percentage of executives who expect credit conditions to worsen in the short term has fallen to the lowest level since February 2020. However, rising bond yields in early 2025 could impact credit expectations in future surveys.
