The National Federation of Independent Business has released its NFIB Small Business Optimism Index, which rose 1.7 points in July to 100.3, slightly above the 52-year average of 98. Contributing most to the rise in the Optimism Index were respondents reporting better business conditions and reporting that it is a good time to expand.

In contrast to the Optimism Index, the Uncertainty Index increased by 8 points from June to 97. Twenty-one percent of small business owners reported labor quality as their single most important problem, up 5 points from June and ranking as the top problem.

“Optimism rose slightly in July with owners reporting more positive expectations on business conditions and expansion opportunities,” NFIB Chief Economist Bill Dunkelberg stated in a press release. “While uncertainty is still high, the next six months will hopefully offer business owners more clarity, especially as owners see the results of Congress making the 20% Small Business Deduction permanent and the final shape of trade policy. Meanwhile, labor quality has become the top issue on Main Street again.”

Key findings include:

• When asked to rate the overall health of their business, 13% reported excellent (up 5 points), and 52% reported good (up 3 points).
• 31% reported the health of their business was fair (down 4 points), and 4% reported poor (down three points).
• The percent of small business owners reporting poor sales as their top business problem rose 1 point to 11%. This is the highest level of poor sales since February 2021.
• The net percent of owners expecting better business conditions rose 14 points from June to a net 36% (seasonally adjusted). This reading is comfortably above the historical average.
• In July, 16% (seasonally adjusted) reported that it is a good time to expand their business, up 5 points from June.
• 11% percent of owners reported that inflation was their single most important problem in operating their business, unchanged from June’s lowest reading since September 2021.
• The net percent of owners expecting higher real sales volumes fell 1 point from June to a net 6% (seasonally adjusted). Though expected real sales are higher than actual sales, the current reading is also comfortably below the 52-year average.
• 22% (seasonally adjusted) plan capital outlays in the next six months, up 1 point from June, but 7 points below the historical average of 29%.

As reported in NFIB’s monthly jobs report, a seasonally adjusted 33% of all small business owners reported job openings they could not fill in July, down 3 points from June and the lowest level since December 2020, though still well above its monthly historical average of 25%. Of the 57% of owners hiring or trying to hire in June, 84% reported few or no qualified applicants for the positions they were trying to fill. A seasonally adjusted net 14% of owners plan to create new jobs in the next three months, up one point from June.