NFIB index drops amid trade fears and excess stock concerns
U.S. small-business confidence declined in June as worries over inventory levels, trade policy uncertainty, and softening sales expectations weighed on sentiment. The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index fell to 98.6, a modest drop of 0.2 points from May.
The most significant driver of the decline was a sharp rise in businesses reporting excess inventory. Nearly 13% of small firms said their stock levels were too high — almost double the figure from May. Simultaneously, expectations for future sales deteriorated, with only a net 7% anticipating improvement in the next three months, down from 10% previously.
Business health outlook and uncertainty diverge
Perceptions of current business conditions also weakened. Just 8% of respondents rated their business as “excellent,” down from 14% in May, while 49% described conditions as “good,” compared to 55% the previous month. The number reporting “fair” or “poor” rose accordingly, reflecting a growing caution in the sector.
Despite the gloom, the survey’s uncertainty index dropped five points to 89, its lowest level in 2025, though still elevated by historical standards. The decline suggests that while challenges persist, some small business owners may be adjusting to the current policy environment and pricing landscape.
Tariff tensions and politics shape sentiment
Ongoing trade tensions, particularly under President Donald Trump’s renewed tariff strategy, continue to weigh heavily. The announcement of 25% tariffs on Japanese and South Korean goods starting August 1 has added pressure, with more trade actions expected soon. While the NFIB survey does not list tariffs explicitly as a concern, broader uncertainty and supply chain impacts likely reflect that influence.
Trump’s recently signed domestic policy bill — dubbed the “big beautiful bill” — has further polarized business sentiment. The NFIB noted a clear partisan divide: Republican-leaning respondents were more optimistic, while Democrats expressed heightened concern over the bill’s projected $3 trillion addition to the national debt and its potential to reduce health insurance coverage for millions.
Inflation worries ease, labor still a concern
Inflation appears to be receding from the top of small business concerns, with just 11% now citing it as their main problem — the lowest level since September 2021. Taxes remain the top issue at 19%, while interest rates and financing fell to the bottom of the list at 3%.
Labor remains a persistent challenge. The percentage of business owners citing labor quality as their top issue stayed close to levels seen during the early days of the pandemic. Compensation pressure also returned, with 33% reporting pay increases, although only 19% plan to raise wages in the coming three months, down slightly from May.
