How Small-Business Optimism Cooled in August, and What It Signals

Small-business owners turned more cautious in August, according to the National Federation of Independent Business's monthly Small Business Economic Trends survey, released September 8, 2026. The group's Small Business Optimism Index fell to 98.7, down 1.1 points from July's reading of 99.8, which had itself been the highest level since August 2025. Despite the decline, August's reading stayed above the survey's 52-year average of 98.0.

The survey draws on mailed responses from NFIB's membership; in August, 476 usable responses came back from a sample of 5,000 owners, a 9.5% response rate, according to NFIB. Of the index's ten components, two rose, six fell and two were unchanged. A worsening outlook for the broader economy contributed the most to the decline, while earnings trends and hiring plans each fell 3 points, NFIB said.

Sales and Profits Weaken on Main Street

A seasonally adjusted net -9% of owners reported higher nominal sales over the prior three months in August, down 5 points from July and the weakest reading since November 2025, NFIB reported. Expectations for the months ahead also slipped: a net 6% of owners expected higher real sales volumes over the next quarter, down 1 point from July.

Profit trends followed sales lower. A net -19% of owners reported higher earnings over the prior three months, down 3 points from July and just 1 point below the survey's historical average. Among owners citing lower profits, 28% blamed weaker sales, 16% pointed to rising material costs and 10% cited price changes for their own goods or services.

Inventory measures softened as well, with a net -6% of owners reporting inventory gains, down 2 points from July. Supply-chain disruptions still affected 62% of small businesses to some degree in August, including 6% who called the impact significant, little changed from July.

Hiring Plans Cool as Job Openings Stay Historically High

NFIB's Small Business Employment Index eased to 101.8 in August from 102.1 in July, staying above both the survey's historical average of 100.0 and its 2025 average of 101.2. A seasonally adjusted net 17% of owners planned to add jobs over the next three months, down 3 points from July's 20%, which had been the highest reading since October 2022.

Openings remained hard to fill even as hiring plans cooled. Thirty-five percent of owners reported positions they could not fill in August, 11 points above the survey's historical average, though down 1 point from July. Of the 56% of owners who were hiring or trying to hire, 82% reported few or no qualified applicants, NFIB found.

Labor quality or availability remained the single most important problem cited by owners, named by 23%, though that was down 4 points from July. Labor costs, by contrast, were cited by just 7% of owners, the lowest share since March 2021. Compensation measures held steady: a net 31% of owners reported raising pay, unchanged from July, while a net 18% planned to raise compensation over the next three months, down 1 point.

Inflation Ties Taxes as the Second-Biggest Worry

Price increases held flat in August. A seasonally adjusted net 31% of owners reported raising average selling prices, unchanged from July and well above the survey's historical average of 14%. A net 28% planned to raise prices over the next three months, also unchanged and above the historical average of 22%.

Inflation's standing as a business problem rose even though the pace of price increases did not. Sixteen percent of owners named inflation their single most important problem in August, up 2 points from July, tying it with taxes, also cited by 16%, as the second-ranked concern behind labor. NFIB's historical average for inflation as the top-cited problem is 7%.

Other concerns moved more modestly: poor sales rose 2 points to 10%, government regulation rose 2 points to 9%, and the cost or availability of insurance held at 8% for a fourth straight month. Competition from large businesses fell 3 points to 4%, and financing and interest rates rose 1 point to 3%.

Credit Costs Ease While Capital Spending Pulls Back

Borrowing costs eased slightly. The average interest rate paid on short-maturity loans was 7.5% in August, down 0.4 points from July's 7.9%, NFIB reported. Twenty-five percent of owners reported borrowing regularly, at least once every three months, down 2 points from July and below the historical average of 34%. A net -2% of owners expected easier credit conditions over the next three months, the most favorable reading since December 2024.

Capital spending plans retreated alongside the more cautious mood. Fifty-three percent of owners reported making capital outlays in the prior six months, down 1 point from July. A seasonally adjusted 24% planned capital outlays over the next six months, down 1 point from July's 25%, which had been the highest reading since December 2024.

Expectations for the broader economy also fell: a net 10% of owners expected better business conditions six months out, down 5 points from July, though still above the historical average of a net 4%. The share of owners calling it a good time to expand held steady at 12%. When asked to rate their own business, 57% called it good, up 2 points from July, and 11% called it excellent, down 3 points from July.

What NFIB's Economists Pointed To

In commentary accompanying the report, NFIB pointed to weak consumer spending and a prolonged conflict involving Iran as sources of the pessimism, saying the conflict had kept energy costs elevated and added to owners' uncertainty. The commentary also said spending tied to artificial-intelligence investment was flowing disproportionately to higher-income consumers, while "most consumers are not included in the party," leaving broader Main Street sales subdued.

"Uncertainty remains elevated among small business owners as they face a mixed set of challenges with weakened sales, supply chain disruptions, and inflation pressures," NFIB Chief Economist Bill Dunkelberg said in the group's news release. NFIB's Uncertainty Index, which tallies "don't know" and "uncertain" answers across six survey questions, fell 2 points to 89 in August, a decline NFIB attributed entirely to fewer owners questioning whether it was a good time to expand. The index remained well above its historical average of 68.