The NFIB Small Business Optimism Index increased by 1.7 points in July, reaching 100.3 and surpassing its 52-year average of 98. The improvement was mainly driven by more small business owners reporting better business conditions and viewing it as a good time to expand operations. However, the Uncertainty Index also rose by eight points from June to 97.
According to the report, labor quality has become the most significant issue for small businesses, with 21% of owners identifying it as their top problem, an increase of five points from June.
“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 Katie Burns commented on local sentiment: “Small business owners here in Arkansas are feeling more optimistic, and that’s in large part thanks to Congress making the 20% Small Business Deduction permanent. While there are ongoing workforce challenges, Main Street is optimistic that we will begin to see more opportunities to expand their operations and improvement in the overall business environment.”
The report found that in July, there was an improvement in how small business owners rated their overall business health: 13% described it as excellent (up five points), while 52% rated it as good (up three points). Thirty-one percent said their business health was fair (down four points), and 4% reported poor (down three points).
Poor sales were cited as the main problem by 11% of respondents, marking the highest level since February 2021. The net percentage of owners expecting better business conditions rose by 14 points from June to a net 36%, which is above historical averages. Sixteen percent indicated now is a good time to expand their businesses, up five points from June.
Inflation remained unchanged from June at 11%, representing its lowest level since September 2021 among those who saw it as their primary challenge. Expectations for higher real sales volumes fell one point from June to a net six percent.
Plans for capital outlays increased slightly; twenty-two percent plan such investments over the next six months—one point higher than June but still below the historical average.
The monthly jobs report showed that a seasonally adjusted thirty-three percent of small businesses had job openings they could not fill in July—the lowest since December 2020 but still above historical norms. Of those hiring or trying to hire in June, eighty-four percent reported few or no qualified applicants. Fourteen percent plan to create new jobs within three months.
Nine percent named labor costs as their top concern—a decrease from June—and fewer owners planned compensation increases compared with previous months.
Capital expenditures have risen: fifty-five percent reported spending on improvements or equipment during the past six months—the highest reading since August 2020—with most purchases going toward new equipment or vehicles.
Sales performance remained mixed; a net negative nine percent reported higher nominal sales over three months—a decline from June—and inventory levels stayed largely unchanged.
Twenty-eight percent plan price increases soon—a figure above historic averages—while actual price hikes fell compared with last month’s data.
Profit trends continued negatively overall; weaker sales were cited most often for lower profits, while those reporting gains credited stronger sales volumes or seasonal changes.
Financing concerns remained low: only four percent listed financing and interest rates as their main issue. Borrowing activity dropped slightly compared with prior periods.
Seventeen percent identified taxes as their biggest challenge—making it second after labor quality—while government regulations ranked fifth at eight percent. Competition from larger businesses was less frequently mentioned than before.
NFIB’s survey methodology involves random sampling from its membership base and has been conducted quarterly since late-1973 and monthly since 1986. The current survey reflects responses collected during July 2025.
