Small Business Optimism Surges to Six-Year High, Buoyed by Trump Policies

Confidence among U.S. small businesses climbed in December to its highest level since late 2018, as expectations of a more business-friendly environment under President-elect Donald Trump continued to bolster sentiment. The National Federation of Independent Business (NFIB) reported that its optimism index rose 3.4 points to 105.1, following a historic monthly gain in November.

The index, which measures sentiment across key areas such as future sales, expansion plans, and hiring intentions, saw significant improvement in seven of its ten components. Notably, the share of businesses expecting better conditions in the coming months soared by 16 points, reaching the highest level recorded since monthly tracking began in 2002.

“Optimism on Main Street continues to grow with the improved economic outlook following the election,” said Bill Dunkelberg, NFIB’s chief economist. “Small business owners feel more certain and hopeful about the economic agenda of the new administration.”

Uncertainty Eases as Owners Look Ahead

Adding to the optimistic outlook, NFIB’s uncertainty indicator fell by 12 points in December, marking the largest two-month decline on record. The drop reflects a shift toward greater clarity on the policy direction in Washington after a Republican sweep of the White House and Congress.

Sales expectations also improved, with the share of respondents anticipating higher sales rising by eight points, reaching its highest level since early 2020. Many small businesses appear poised to expand operations, encouraged by expectations of tax cuts, regulatory relief, and infrastructure spending under the incoming administration.

While inflation remains a key concern for business owners, recent and planned price changes suggest stabilization, albeit at elevated levels. Government data due later this week is expected to show steady consumer price increases, providing further support for the Federal Reserve’s decision to maintain current interest rates.

Labor Market and Credit Conditions Show Signs of Stabilization

Labor challenges, particularly finding qualified workers, remain a persistent issue for small businesses, though the latest data indicates some easing. Hiring intentions remain positive as owners seek to take advantage of improving market conditions.

The share of business owners expecting tougher credit conditions in the near term fell to its lowest level since February 2020. However, rising bond yields at the start of 2025 could influence credit expectations in upcoming surveys.