Small business owners in the U.S. are planning a hiring and investment wave that the economy has not seen in years.
The National Federation of Independent Business’s small business optimism index rose 2.4 points to 99.8, the highest level since August 2025. That was a much bigger improvement than economists had expected. It is the highest reading since August of last year.
Hiring and investment plans are up. The net share of small businesses planning to make capital outlays rose to the highest level since the end of 2024. The net share planning to add workers to their payrolls rose to the highest since October 2022.
Eight out of ten components of the index rose in July.
Concerns over inflation eased. The share of small businesses saying they increased prices fell compared with June and so did the share of owners saying they plan on price increases in the near future. Reports of inflation as the most important problem declined for the first time this year. Inflation now ranks as the third top problem.
The top-ranked problem, cited by 27 percent of owners, is labor quality or availability. Sixteen percent say that taxes are their most important problem, followed by inflation at 14 percent. Eight percent say the problem is labor costs. Eight percent also say poor sales is the biggest problem. Government regulation and red tape slipped a point to seven percent. Competition with big business also came in at seven percent.
Just two percent reported that financing and interest rates were the top problem, which may support the view of hawks at the Fed who argue that current rates are not restrictive enough to contain inflation.
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