Small business sentiment across the United States ended 2024 on a high note, according to the latest report from the National Federation of Independent Business (NFIB). The Small Business Optimism Index jumped to 105.1 in December—its strongest reading in over six years and the second consecutive month above its long-term average. The rise is being attributed to easing inflationary pressures, stronger sales expectations, and improving clarity on government policy following the November elections.
The index’s surge to its highest level since October 2018 marks a significant shift in outlook among Main Street business owners. This rebound in optimism came alongside a notable drop in the NFIB’s Uncertainty Index, which declined by twelve points to 86. That fall suggests business owners are feeling more confident about future policy directions, especially in terms of taxation, regulation, and economic stability. Analysts say this reflects greater post-election clarity and fewer concerns about abrupt regulatory shifts.
Improved sales forecasts were a key driver of the index’s rise. A growing number of respondents indicated they expect higher revenues over the next three to six months, and many expressed that now is a good time to expand operations—two components that reached their strongest levels since early 2020. Inventory restocking also ticked upward, a typical year-end trend but one that is being supported by consistent consumer demand and more stable supply chains.
Even with this uptick in optimism, some of the challenges that have long plagued small businesses remain. Labor shortages continue to be a hurdle, though there are signs of slight relief. Approximately 35% of small business owners reported difficulty filling open positions, particularly for skilled roles in manufacturing, construction, and logistics. While still high, that percentage has eased slightly from its peak levels earlier in 2023.
Hiring intentions remain firm, signaling continued confidence in the broader economy. About half of small firms said they are actively hiring, and a net 18–22% of respondents plan to increase staffing over the coming quarter. That hiring strength is important not only for business performance but also for local employment markets, as small businesses employ nearly half of all private-sector workers in the U.S.
Another key finding in the December report was the marked decline in inflation concerns. Only 20% of respondents named inflation as their most pressing issue—the lowest share since early 2021. This drop suggests that cost pressures are starting to moderate, offering some relief after more than two years of sustained price hikes. Business owners reported fewer plans to raise prices, and fewer cited rising input costs as a barrier to profitability.
Sector-level data also showed notable trends. The manufacturing industry posted an optimism index of 106.2 in January’s quarterly breakout report—driven by expectations of robust orders and increased capital spending. Construction firms remained confident as well, with a reading of 104.9, despite continuing difficulties in finding qualified labor, which 49% of construction respondents flagged as their top concern.
Retailers also reported improved sentiment thanks to stronger-than-expected holiday sales, and service-based businesses noted more predictable operating costs and better customer traffic. Across the board, most sectors showed stable or improving outlooks heading into 2025.
Looking forward, the data indicates that small businesses are positioned to play a meaningful role in supporting the broader U.S. economy through the first half of 2025. While lingering challenges such as labor shortages and global supply chain fragility remain on the radar, the easing of inflationary pressures and the return of stronger consumer demand are offering a more favorable business environment.
Policymakers are likely to view this report as a sign that tighter monetary policy may be taking effect without significantly derailing business confidence. If inflation continues to cool and employment remains steady, many economists expect small firms to maintain their upward trajectory in terms of hiring and investment—helping to stabilize growth in a still-uncertain global economic landscape.
