Small Business Optimism Dips to 97.9 on Inflation, Labor Woes

A small drop with real warning signs

The National Federation of Independent Business (NFIB) said its Small Business Optimism Index fell 0.8 points in September to 97.9. That puts it one-tenth of a point below the survey's 52-year average of 98.0.12 The result was a little worse than forecasters expected: the consensus was 98.2, and August's reading was 98.7.3 It is the lowest level since June, when the index stood at 97.4.4

Outlets described the move very differently. CFO Dive said optimism "slumped" below its historical average.1 NFIB's own analysis said optimism "fades slightly."15 ABA Banking Journal said the index "ticks down."16 All three framings are fair, because the change in the headline number is small. The more useful story is in the details. Owners are less confident about the near future, more of them name inflation as their biggest problem, their borrowing costs are rising, and most still can't find the workers they need. Taken together, the report describes a sector that is tightening its belt, not one in crisis.

Expectations fell; current conditions mostly held

NFIB said worse expectations for business conditions, and fewer owners saying it was a good time to expand, did the most to pull the index down.14 A net 6% of owners expect business conditions to improve over the next six months. That is 4 points lower than in August and the second monthly decline in a row.13 Only 7% said it was a good time to expand, down 5 points.13 TheStreet's analysis notes that this matches April and May as the weakest expansion reading since October 2024. Owners who said it was not a good time to expand most often blamed economic conditions, followed by the political climate and the cost of expanding.3

Owners also rated their own businesses less favorably. The share calling their business "good" fell 9 points to 48%, while the share calling it "fair" rose 7 points to 35%.13 NFIB Illinois State Director Noah Finley noted that most owners still describe their business as good or excellent. In his view, rising uncertainty is mainly holding back investment rather than signaling broader distress.5

One measure moved the other way. The net share of owners expecting higher real sales rose 3 points to 9%.11 TD Economics noted that this is still below the 2025 average.11 Meanwhile, NFIB's Uncertainty Index rose 1 point to 90, far above its historical average of 68.13

Small business costs: fuel, materials and prices

Inflation is the clearest change in this report. Twenty percent of owners named it their single most important problem, up 4 points from August. The historical average is 7%.13 TheStreet notes that the figure was 14% a year earlier.3 TD Economics says the share of owners worried about inflation is close to the peak it reached earlier in 2026.11

The reporting agrees that energy is the main driver. CFO Dive links the price pressure to the war with Iran. It cites AAA data showing diesel up about 72% over the past year, to $6.28 a gallon.1 It also quotes a Georgia retailer who said fuel costs are hurting both delivery trucks and inbound freight, and are cutting into customers' spending money.1 NFIB's analysis likewise names fuel and energy costs as the pressures owners are still adjusting to.15

Those costs are showing up in profits. A net -20% of owners reported better profit trends, down 1 point. Among owners whose profits fell, 34% blamed weaker sales and 24% blamed higher material costs. Those shares rose 6 and 8 points.14 Owners are also raising prices. A net 31% raised average selling prices, unchanged from August and well above the historical average of 14%. Another net 31% plan to raise prices in the next three months, up 3 points.13 TD Economics adds that the average share of firms raising prices in 2026 is the highest since 2023.11

This looks like a margin squeeze. Owners are passing costs on to customers, but higher input costs and slower sales are still eating into profits. A services owner in Ohio said customers are unsure about their finances and are starting to cut back.13 If that becomes common, firms will find it harder to keep raising prices.

Labor quality is still the top problem

For the third month in a row, "labor quality or availability" was the most common top problem, named by 26% of owners. That is up 3 points and 14 points above the historical average.13 A year earlier, the figure was 18%.3 Thirty-two percent of owners had job openings they couldn't fill, 8 points above the historical norm. Among owners hiring or trying to hire, 87% said they had few or no qualified applicants.13

Underneath that, the labor market looks softer. The share of owners hiring or trying to hire fell 5 points to 51%.13 NFIB's Employment Index fell 1.2 points to 100.6, which is below its 2025 average.15 TheStreet reports that actual employment changes stayed at a net -7%, the weakest since June 2025.3 Openings for skilled workers fell, while openings for unskilled workers rose.14 Labor costs as a top concern dropped to 6%, the lowest since December 2020.14

The best way to read this: owners are not mainly worried about wages. They are worried about finding qualified people at all. CFO Dive points to the immigration crackdown as one factor making hiring harder.1 NFIB's commentary adds that the AI boom has done little to change hiring on Main Street.13

Small business lending: borrowing is getting more expensive

The credit numbers matter most for lenders. NFIB's commentary says the Federal Reserve raised its policy rate and market rates followed.13 A net 8% of owners said they paid a higher rate on their most recent loan, up 4 points and the most since June 2025.14 The average rate on short-term loans rose 0.7 points to 8.2%. That is close to the historical average of 8.3%, so rates have returned to normal levels rather than hitting extremes.14

Access to credit, as opposed to its price, held steady. A net 3% of owners said their last loan was harder to get, unchanged from August. Expectations for credit conditions fell 1 point to a net -3%.14 Only 22% of owners borrow regularly, down 3 points and well below the historical average of 34%.14 Only 3% named financing and interest rates as their top problem.14

The ABA's economists conclude that slower expansion plans could reduce demand for small business credit. They add that persistent inflation and labor costs could squeeze margins and owners' ability to repay debt, which could dampen commercial loan demand at banks.16 The capital spending data support that view. Fifty-one percent of owners made capital outlays in the past six months, and only 22% plan to in the next six. Both figures are down and below their long-term averages.14 In short, fewer owners are borrowing, and those who do are paying more.

Business credit cards: no sign of stress yet

Business credit cards often cover cash shortfalls when bank loans get more expensive. So far, card data show no clear deterioration. American Express reported $46.1 billion in U.S. small business card balances at the end of August. The 30-day delinquency rate was 1.3%, down from 1.4% in June. The net write-off rate was 2.2% in August, compared with 2.6% in July.23 Amex has since filed its September figures.21

U.S. consumer card data point the same way. Fed data show commercial bank card delinquencies falling to 2.85% in the second quarter of 2026, the fifth straight quarterly decline from a 2024 peak. New York Fed economists say the widely shared 12.8% "serious delinquency" figure includes old charged-off debt. The rate at which balances newly become delinquent has been roughly flat since 2024. The contrast with Canada is notable. There, Equifax reports that 60-plus-day delinquencies on commercial credit cards rose 24% year over year.

Card performance usually lags changes in borrowing costs. With short-term loan rates rising and profits weak, card balances and delinquencies are worth watching in the coming months.

What to watch next

NFIB's commentary expects consumer spending and AI investment to keep the economy growing for the rest of the year. It names the midterm elections and the Iran war as major open questions.3 TD Economics says markets expect the Fed to raise rates further.11 The IMF's chief economist has argued that central banks should stay restrictive given the inflation outlook.1

One caveat: the survey is based on 411 usable responses from a sample of 5,000 NFIB members.14 A 0.8-point change should be read with that in mind. The overall direction is still clear. Costs are rising, borrowing is getting more expensive, owners are pulling back on investment, and finding qualified workers remains the biggest problem. Even with the index near its long-term average, that combination points to slower growth for small businesses through the end of the year.