A recent survey published on Tuesday indicates that small business owners experienced a slight uptick in optimism during May, according to the National Federation of Independent Businesses (NFIB).
The NFIB Small Business Optimism Index, which gauges owners’ expectations for their businesses and the overall economy, increased by three points to reach 98.8, marking a rise for the first time this year. While this is above the average of 98, it remains under the midpoint of 100.
However, alongside this optimism, economic uncertainty also saw a rise, as the NFIB uncertainty index climbed to 94 points from April’s figures.
Bil Dunkelberg, the NFIB chief economist, commented, “While there’s a rebound in May, we’re observing a growing uncertainty among small business owners. The economy might continue to perform relatively well until we address the core sources of uncertainty, but there’s a noticeable improvement in expectations regarding business conditions and sales growth.”
Peter Earl, the director of economics at the Institute of Economics, reflected that the rise in the optimism index from 95.8 to 98.8 suggests a modest recovery among business owners. He noted that recent improvements in US-China trade relations might offer some relief to small to medium-sized enterprises that have been heavily impacted by tariffs and supply chain issues. This improvement indicates a potential path toward economic growth for many businesses.
Nevertheless, Earl warned that the broader economic landscape remains fragile. Stock levels are low and uncertainty persists, particularly related to trade policy. He mentioned that businesses are still citing quality of work, inflation, access to credit, and ongoing concerns as significant issues. “From a macroeconomic standpoint, the optimism we’re seeing might provide enough positive demand for a soft landing, but risks are still significantly tilted toward negative outcomes,” he added.
The NFIB investigation revealed that the US economy actually added more jobs than anticipated in May, according to data from the Bureau of Labor Statistics released on June 6. Additionally, many Americans, including small business owners, reportedly have a positive view of how President Donald Trump is managing the economy during his second term.
Trump has committed to enhancing the economy, emphasizing his administration’s aims to reduce deficits, maintain low taxes, and advocate for fair trading practices, all while supporting hardworking Americans.
Looking toward June, Earl expressed that the sentiment among small and medium enterprises might remain steady or decline unless concrete progress is made in trade and fiscal policies. Despite a slight easing in labor market pressures and inflation expectations, lingering questions regarding tariffs and the effects of recent legislative measures could still undermine confidence.
Earl emphasized that sentiment indicators like the NFIB index are early indicators of potential shifts in the business cycle, and unless there’s clearer guidance from policymakers and the economic situation holds strong, the optimism seen in May may not last long.
