The NFIB small business optimism index is down 2.1 points to 89.8 in December after 91.9 in November. This is the 12th month in a row where the index is below the NFIB's 49-year average index at 98. The index is below the consensus of 91.3 in an Econoday survey. The reading shows small businesses continue to face high levels of uncertainty about economic conditions, the political outlook, and persistent inflation which includes upward wage pressures.

The index has 8 components lower, 1 higher, and 1 unchanged. The index decline is concentrated in two components. The component of expectations for the economy to improve is down 8 points to minus 51 percent, and back to levels seen in the summer months when inflation was on the rise after the Russian invasion of Ukraine. The component of the earnings trend is also down 8 points to minus 30 percent, wiping out the improvement seen in November. The other components are within normal month-to-month variation of a few points.

The NFIB uncertainty index is up 3 points to 71 in December, nearly erasing the 4 point decline to 68 in November.

The small business optimism index has been below the historical average of 98 for 11 months in a row. December's consensus is 91.3 versus 91.9 and 91.3 the past two reports.

The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of 10 seasonally adjusted components based on the following questions: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.

Small businesses are responsible for a majority of new job creation and the NFIB focuses on this sector of the economy. The direction of the health of small businesses can portend changes in the stock market - especially small caps.