The National Federation of Independent Business (NFIB) reported a decline in its Small Business Optimism Index for March 2025, dropping 3.3 points to 97.4. This places the index below the 51-year average of 98, as small business owners across the country express concern over ongoing policy shifts and economic conditions.
“The implementation of new policy priorities has heightened the level of uncertainty among small business owners over the past few months,” said NFIB Chief Economist Bill Dunkelberg. “Small business owners have scaled back expectations on sales growth as they better understand how these rearrangements might impact them.”
The NFIB Uncertainty Index also fell eight points from February’s near-record high, landing at 96.
Taxes and Labor Quality Top Business Concerns
Eighteen percent of small business owners identified taxes as their single most important problem in March, a two-point increase from February and the highest percentage since November 2021. Labor quality remains the top concern, cited by 19% of owners, unchanged from the previous month.
Other top concerns included inflation and labor costs. Sixteen percent of owners cited inflation as their primary problem, while 11% pointed to labor costs—down one point from February.
Expectations and Hiring Trends Weaken
The share of owners expecting better business conditions dropped sharply, falling 16 points to a net negative 21% (seasonally adjusted). This marks the third straight month of declining expectations and represents the largest single-month drop since December 2020.
A net 3% of owners expect higher real sales volumes, down 11 points from February, while a net negative 11% reported higher nominal sales over the past three months—the best reading since March 2024.
Hiring trends also reflect these cautious expectations. Forty percent of owners reported job openings they couldn’t fill, up two points from February. Of the 53% attempting to hire in March, 87% said they found few or no qualified applicants. Plans to create new jobs over the next three months fell to a net 12%, down three points.
Profit and Pricing Pressures Persist
The net percentage of owners raising average selling prices fell by six points to 26% (seasonally adjusted), marking the largest monthly decline since December 2022. Still, 30% plan to increase prices in the coming months—the highest reading since March 2024.
Profit trends remain weak, with a net negative 28% reporting positive profit trends, four points worse than February. Among those with lower profits, 35% cited weaker sales, 18% seasonal changes, 11% material costs, and 8% labor costs. Higher profits were attributed to stronger sales (55%), seasonal factors (16%), and increased selling prices (11%).
Capital Spending and Credit Conditions
Fifty-nine percent of small business owners reported capital outlays in the past six months. Of those, 43% purchased new equipment, 27% bought vehicles, and 16% upgraded facilities. Thirteen percent spent on new fixtures or furniture, and 5% acquired new buildings or land.
Planned capital spending is up slightly, with 21% expecting to make outlays in the next six months, a two-point increase from February.
Access to credit appears to be tightening. A net 6% of owners reported their last loan was harder to obtain, up four points from February—the largest jump since September 2023. Twenty-eight percent reported borrowing regularly, and 4% said they paid a higher rate on their most recent loan.
Expansion Sentiment Softens
Only 9% of small business owners said it is a good time to expand, down three points from the previous month. When assessing the overall health of their business, 11% rated it “excellent,” 53% “good,” 31% “fair,” and 4% “poor.”
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Joshua Sophy