Small Business Confidence Rebounds to 91.1 Despite Rising Costs

A rebound driven by company outlooks, not the economy

After two straight months of decline, small business leaders turned more optimistic in October. The question is whether that optimism can withstand costs that keep rising. The WSJ/Vistage Small Business CEO Confidence Index climbed 6.1 points to 91.1, up from 85.0 in September. That put it back above its 12-month average of 89.7 and at its highest reading since July.1

The gain came almost entirely from how CEOs see their own companies. The share expecting higher profits rose 11 percentage points to 56%. Expectations of revenue growth moved from 61% to 70%. Both readings were the strongest since February.1 Hiring intentions also improved: 58% of CEOs plan to add staff, compared with 51% a month earlier.1

The survey's own framing explains why this is not a clean recovery story. Better confidence has not come with lower costs. Asked about their main business expenses over the previous three months, 44% of CEOs said those costs had risen faster than the 3.4% CPI benchmark in the question. Another 39% said costs had grown roughly in line with it.1 Only 5% said costs had risen more slowly than inflation, and just 1% reported a decrease.1 The poll ran October 1–13 and covered 368 leaders of firms with annual revenue between $1 million and $20 million.1

My reading is that October was a month when owners decided they could run their businesses through the squeeze, not a month when they decided the squeeze was ending.

Where the costs are coming from

Labor was the cost CEOs mentioned most in their written answers. That covered wages, recruiting, retention and the price of hiring qualified people. Fuel and energy came next, followed by insurance and health care.1 Many respondents named several rising costs rather than one main culprit. Some also pointed to software subscriptions, IT infrastructure and AI as growing expenses.1

Other surveys back up that list. TD Bank's year-end survey of 200 owners found inflation (55%), staffing costs (54%), weaker consumer spending (53%) and inventory costs (53%) among the top financial risks.5 In the Justworks and U.S. Chamber of Commerce index, 54% named inflation as a top challenge. That was the third quarter in a row above 50%.4 NFIB's September data showed inflation rising four points to 20% as owners' single most important problem, now second only to labor quality. The historical average for inflation on that measure is 7%.14

Energy stands out as a newer pressure. Massachusetts' business confidence survey described some firms expanding while others struggled with rising energy and input costs.10 NFIB tied the cooling optimism in its own data partly to higher fuel and energy costs.14

Three ways owners are responding

The Vistage written answers show three broad strategies: raising prices, absorbing the increases, and changing how the business operates. Many firms are using more than one.1

Raising prices has limits. One manufacturer said it lost business after passing on higher labor costs. Other respondents said they were "behind" on price increases.1 Some firms cannot reprice at all. Government contractors with fixed unit rates, and companies hit hard by fuel costs, said they were simply absorbing the increases for now.1 A third group is changing suppliers, bringing work in-house, cutting usage or looking at cheaper equipment, including refurbished data-center hardware.1

NFIB's data shows the pricing pressure across the wider economy. A net 31% of owners raised average selling prices in September, and a net 31% plan to raise them.12 TD Economics noted that the average share of firms raising prices in 2026 is the highest since 2023.12

Sales are growing faster than profits

The most consistent finding across these surveys is that revenue is outpacing profit. In the Vistage data, 70% of CEOs expect revenue growth but only 56% expect profits to improve. ITR Economics, cited in the report, calls this risk "profitless prosperity."1

Main Street America found the same pattern in a much larger, more retail-heavy sample of 1,568 owners. Average confidence rose to 7.5 on a 10-point scale, back near the high levels of 2022–2024 and well above the low of spring 2025.3 The share reporting higher revenue rose from 26% in spring 2025 to 34%. The share reporting higher net profit rose from 16% to 26%. The group concluded that rising expenses are eating into margins.3 Its data also shows the gains are uneven. Of the 39% of businesses whose profits fell over the past six months, more than half have been declining for a year or longer.3

NFIB's earnings data is weaker still. A net -20% of owners reported positive profit trends in September. Among owners whose profits fell, 24% blamed rising material costs, up eight points from August.13

Where the surveys disagree

The October rebound does not line up neatly with every other measure. NFIB's Small Business Optimism Index fell 0.8 points in September to 97.9, just below its 52-year average of 98.0.11 Its Uncertainty Index rose to 90, far above the historical norm of 68.14 The share of owners saying now is a good time to expand dropped five points to 7%.17

There are a few reasons for the gap. The surveys measure different moments: NFIB's covers September, while Vistage polled in early October. They also cover different firms. Vistage surveys CEOs of companies with $1 million to $20 million in revenue.1 NFIB samples its broader membership, which tends to include smaller firms.13 The Vistage data itself shows that size matters. Among firms with $1–4 million in revenue, 63% said the economy had worsened, compared with 47% of firms with $10–20 million.1

On one point, every survey agrees: owners feel better about their own businesses than about the economy. In the Justworks–Chamber index, which rose four points to 70.5 in the third quarter, 71% of owners called their business healthy. Only 27% said the same of the U.S. economy, down from 40% a year earlier.4 In the Vistage data, 52% of CEOs said economic conditions had worsened over the past year, the highest share since May 2025. Just 21% expect improvement.1 TD's survey is the exception, with 78% saying they are more optimistic about the economy than six months ago.5 With only 200 respondents, that result looks to me more like a data point to watch than a reason to doubt the overall picture.

Lending: demand for credit as it gets more expensive

The lending side complicates growth plans. The Federal Reserve raised rates in mid-September. The bank prime rate moved to 7.00% on September 17, in what one industry summary described as the Fed's first hike since 2023.22 TD Economics says markets expect more tightening in the coming months.12

Owners are already paying more. In September, a net 8% of NFIB respondents said they paid a higher rate on their most recent loan, the highest share since June 2025. The average rate on short-maturity loans rose 0.7 points to 8.2%.13 Only 22% of owners borrow regularly, well below the historical average of 34%.13 Expectations for credit conditions slipped to a net -3%.13

Even so, demand for financing has not gone away. TD found that 62% of owners expect to seek financing before year-end, even though 73% delayed at least one investment this year because of uncertainty.5 Government-backed lending has slowed. The SBA approved 56,130 7(a) loans worth $32.4 billion in fiscal 2026, a double-digit decline from the prior year. The steepest drops were in loans of $150,000 or less.25 New SBA rules that took effect October 1 add more friction for business buyers. Small acquisitions no longer qualify for the faster express-style process, which could stretch approvals to about three months.28

The American Bankers Association's chief economist's office expects slower expansion plans to reduce demand for small-business credit. It also warns that persistent inflation and labor costs could strain margins and owners' ability to repay debt.18 That points to the main risk in October's rebound. The Vistage data shows more CEOs planning to increase fixed investment, at 38%, up for a second straight month.1 But if firms borrow at rising rates while their margins shrink, sales growth may not be enough to cover the cost of that debt.

What to watch

The November Vistage survey runs November 2–9.1 It will show whether October's improvement was a one-month bounce or the start of a trend. NFIB's October report will show whether the smaller firms in its sample are seeing the same improvement. The key number in both will be profit expectations compared with revenue expectations. As long as that gap persists, small businesses can be confident and still under financial pressure.