Monthly Update: What to Know About the Latest NFIB Small Business Optimism Index

Last call for 2025! The most recent NFIB Small Business Optimism Index was just unveiled, capturing data from December 2025. Released monthly by the National Federation of Independent Business (NFIB), the index captures how owners feel about sales, hiring, profits, capital spending, and broader business conditions. December’s data reveals both challenges and cautious optimism as small companies look ahead to the new year—so let’s check out the findings…

Optimism Is Above Long-Term Average

According to the NFIB’s December 2025 survey, the Small Business Optimism Index rose to 99.5, marking an increase of 0.5 points from November and keeping the index above its 52-year average of 98. This uptick was driven mainly by more owners expecting better business conditions over the next six months, suggesting that sentiment is improving after a period of economic uncertainty. Even though 99.5 isn’t dramatically high, remaining above the long-term average has historical significance: small business owners tend to report stronger investment, hiring, and sales expectations when confidence stays above this threshold.

Key Components That Drove Optimism

Outlook for Business Conditions

One of the strongest contributors to the optimism increase was the growth in the number of owners expecting better business conditions. The NFIB found that the net percent of owners expecting improved conditions rose by nine points from November to 24 percent (seasonally adjusted), a huge help in boosting the headline index.

Sales, Inflation, and… Prices

The cost environment continues to matter. In December, both actual and planned price increases fell slightly from November, with the net percent of owners raising selling prices dropping four points to a net 30 percent (again, seasonally adjusted). Despite that drop, price increases still remain well above the historical average of net 13 percent, indicating that inflationary pressures continue to be part of small business decision-making.

While inflation concerns eased modestly, with only 12 percent of owners citing inflation as their single most important problem (down three points from November), price pressures still play into how businesses budget and price goods or services.

Hiring and Labor Market Trends

Labor quality remains a sticking point for many owners. In December, 33 percent of small business owners reported job openings they couldn’t fill, unchanged from November and above the historical average of 24 percent.

However, there were modest signs of improvement in the hiring landscape: while owners reported significant challenges finding qualified workers (a continuing theme throughout 2025) the share reporting few qualified applicants rose relative to those saying none. This suggests that, even though hiring remains difficult, small business owners may be seeing a slight easing in labor scarcity.

Sales and Inventory Trends

Not all components were positive… The December report showed that actual sales remained below the historical average, with a net negative 8 percent of owners reporting higher nominal sales over the past three months, though this was slightly improved from the prior month.

Meanwhile, inventory trends showed a modest rebound, with the net percent of owners reporting inventory gains rising six points to a net negative 1 percent (the highest reading of the year), suggesting that inventory positioning might be stabilizing after earlier supply-chain challenges.

Capital Spending and Investment

Capital expenditure behavior provides another window into small business confidence. In December, 56 percent of owners reported capital outlays in the previous six months (up four points from November), with expenditures spanning equipment, vehicles, and facility improvements. However, plans for future capital outlays were weaker, with only 19 percent indicating they plan to invest in the next six months—a historically modest figure.

Problems Owners Face

Taxes rose to the top of the list in December, with 20 percent of small business owners naming taxes as their single most important problem, up six points from November and the highest level since May 2021. Labor quality and costs followed as key concerns. Inflation and government regulations were cited less frequently, but they remained part of the mix affecting owner sentiment and decision-making.

What This Means for Small Business Owners

The December 2025 insight from the NFIB Small Business Optimism Index shows resilience among small business owners. Even though economic challenges like labor quality, price pressures, and taxes persist, the fact that the overall index remains above its long-term average signals at least moderate confidence going into 2026. Owners expecting better business conditions are a positive sign, and investment activity, while cautious, suggests many businesses are positioning for growth.

Understanding the economic climate is critical, but so is access to capital when it’s time to act. At ARF Financial, we specialize in helping small business owners secure the financing they need to navigate hiring challenges, invest in operations, or expand when conditions are right. Whether you need a flexible line of credit or short-term funding, ARF Financial provides tailored solutions that support your business goals in any economic environment—including times like these when folks are cautiously optimistic!