Small Business Optimism in the U.S. Rises Post-Trump Victory Ahead of November 2024

As an important economic development, the National Federation of Independent Business (NFIB) Small Business Optimism Index rose by eight points to reach 101.7 in November 2024. This increase marks the first time the index has surpassed the 50-year average of 98 in 34 months, reaching its highest level since June 2021. Based on data collected in November, the NFIB report indicated a significant rise in sentiment among small business owners, with nine of the ten components of the index showing improvement and none declining.

NFIB Chief Economist Bill Dunkelberg attributed this rise in optimism to the results of recent elections, signaling potential changes in economic policy. Dunkelberg stated, "The election results indicate a major shift in economic policy, which has led to an increase in optimism among small business owners. Main Street has also become more confident about future business conditions after the election, breaking the record level of uncertainty that has lasted for nearly three years. Business owners are particularly hopeful about tax and regulatory policies that support strong economic growth and relief from inflationary pressures. Additionally, small business owners are eager to expand their operations."

Key findings from the November report include: A significant 41-point increase in the net percentage of business owners expecting the economy to improve, reaching a net 36%, the highest level since June 2020. The net percentage of business owners who believe it is a good time to expand their businesses increased by eight points, reaching a net 14%, the highest level since June 2021. There was an 18-point increase in the net percentage of business owners expecting higher real sales volumes, reaching a net 14%, the highest since February 2020. The net percentage of business owners paying a higher rate on recent credit remained at 5%, consistent with the lowest level since January 2022 recorded in October. Capital expenditure plans for the next six months rose to 28%, a six-point increase from October and the highest level since January 2022. The frequency of positive profit trend reports rose to a net negative 26%, the highest reading of the year. Inflation fell to 20% as the primary concern, surpassing labor quality by one point. Additionally, 36% of business owners reported unfilled job openings, an increase of one point since October.

The report also emphasized that 54% of business owners made capital expenditures in the last six months, 39% purchased new equipment, and 28% plan to increase capital expenditures in the next six months. Furthermore, a net negative 13% of business owners reported higher nominal sales in the past three months, an improvement from October. Price increases were most frequently observed in the wholesale, finance, retail, and services sectors. A net 32% of business owners reported raising wages, with a net 28% planning to raise wages in the next three months, the highest reading of the year.

While labor quality slightly decreased to 19% as the primary concern, labor costs rose to 11%. Among business owners reporting lower profits, sales were the primary worry, while those reporting higher profits largely praised increased sales volumes. Only 4% of business owners indicated their credit needs were not being met, and 5% reported financing as their most significant business problem.

NFIB has been tracking economic trends among small businesses through regular surveys since 1973, and this latest report was published following the November 2024 survey.