The National Federation of Independent Business (NFIB) Small Business Optimism Index declined for the third consecutive month in March, landing at 97.4 — just below its 51-year average of 98. Business owners’ outlook on the economy continued to dim, with the net percent expecting improvement over the next six months falling 16 points to 21%. While still significantly better than the -36% recorded a year ago, this marks the steepest monthly drop since December 2020. As in previous months, labor quality and taxes remained the most frequently cited challenges facing small businesses.
Following are some key takeaways from the March 2025 NFIB Small Business Economic Trends Report:
Optimism Declines Sharply
The Small Business Optimism Index fell 3.3 points to 97.4, its lowest point since June 2022 and below the long-term average of 98. The decline, primarily driven by worsening sales expectations and business conditions, underscores growing uncertainty amid fluctuating economic signals.
Hiring Plans and Labor Struggles
Hiring remains a challenge: 40% of owners report unfilled job openings, with the construction and transportation sectors facing acute shortages. Hiring plans have softened, and 19% of owners still rank labor quality as their top business problem, followed closely by taxes (18%).
Wage Pressures and Profit Squeeze
A net 38% of small businesses raised compensation, highlighting efforts to retain talent, but also placing strain on profit margins. Reports of declining profits increased, with 35% citing weaker sales and 11% pointing to rising material costs.
Sales Sluggish, Inventory Low
Sales remain in recession territory, with a net -11% reporting higher nominal sales and expectations for future sales falling for the third month straight. Inventory replenishment is weak, reflecting tepid demand and concerns about overstocking.
Inflation and Price Adjustments
Inflation is cooling but still persistent. A net 26% of owners raised prices in March—well below pandemic highs but above historical norms. Price increases were most common in finance, retail, and construction.
Credit Access Tightens
Access to capital has become more difficult: a net 6% of owners said their most recent loan was harder to obtain, the steepest increase since late 2023. Loan interest rates are rising modestly, averaging 8.9%, and 28% of businesses reported regular borrowing, up from previous months.
Outlook and Expansion Dampen
Only 9% of owners consider it a good time to expand—an indication of persistent caution. The net percentage expecting better conditions dropped a steep 16 points, signaling a pessimistic turn as political and economic uncertainties mount.
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