The NFIB small business optimism index is down 1.6 points to 95.8 in April to the lowest reading since 93.7 in October 2024. The April index is above the consensus of 94.7 in the Econoday survey of forecasters. In April, only 3 index components are higher, 6 are lower, and 1 is unchanged from the prior month. If optimism is down, the uncertainty index is 4 points lower to 92 in April to its lowest level since 92 in August 2024. Survey respondents continue to report elevated uncertainty, but below the peaks seen in recent months as the political landscape evolved.

The largest downward movement is 6 points to 15 percent in expectations for the economy to improve to its lowest since minus 5 percent in October 2024, and 6 points in current job openings to 34 percent to the lowest since 34 percent in September 2024. There is a 4 point decrease in expectations for higher sales to minus 1 percent, the lowest since minus 4 percent in October 2024. There are decreases of 3 points in capital expenditure plans to 18 percent, plans to increase inventory to minus 4 percent, credit conditions to minus 7 percent. Overall, small businesses' perceptions of conditions have retreated and largely erased any gains that followed the end of the presidential election in 2024.

Partially offsetting the lower components is a 7 point increase to minus 21 percent in the earnings trend.

Among survey respondents, 19 percent report their single most important problem is the quality of labor. Those seeing inflation as their most important problem have faded with taxes overtaking that category. In April, 16 percent said taxes is their most important problem.

Uncertainty around Trump administration policies continues to depress business sentiment. The consensus looks for the NFIB small business sentiment index to fall to 94.7 in May after dropping for a third straight month to 97.4 in April, down from100.7 in March. Pressure from the business community is rising on President Trump to deescalate the trade war or at least to provide greater policy visibility.

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.