Main Street firms reported a notable decrease in confidence during September 2025, as the NFIB Small Business Optimism Index declined to 98.8, signaling growing pessimism due to persistent inflation, a government shutdown delaying economic data, and a gloomy outlook on future business conditions.
The sentiment among U.S. small businesses took a notable downturn in September 2025, marking the first decline in three months for the National Federation of Independent Business (NFIB) Small Business Optimism Index. Dropping 2.0 points to 98.8, this dip signals growing concerns over unfavorable operating conditions and persistent inflationary pressures. The widespread reporting of price increases by business owners suggests that inflation remains a central and worsening issue, casting a shadow over the broader economic outlook.
A Deeper Look at September 2025: Uncertainty Takes Center Stage
The latest NFIB survey reveals that expectations for improved business conditions over the next six months plunged an alarming 11 points to just 23%. This sharp decline underscores a significant lack of confidence among entrepreneurs. Further exacerbating the apprehension, the survey’s Uncertainty Index soared by 7 points from August to a staggering 100, reaching its fourth-highest reading in over 51 years. NFIB Chief Economist Bill Dunkelberg highlighted the volatile environment, noting, “Uncertainty is very high, the (Trump) administration has a lot of policy changes still in the air, lots of moving parts.” He added that while overall economic growth is solid, it’s “driven perhaps more by AI-related investments than by spending that impacts Main Street firms,” suggesting a disconnect between technological advancements and the everyday struggles of small businesses.
Historical Context: A Pattern of Fluctuating Optimism
To fully grasp the significance of the September 2025 figures, it’s crucial to examine past trends. In stark contrast, September 2022 saw a slight improvement in small business confidence, with the NFIB index edging up 0.3 points to 92.1. While inflation was still a top concern for 30% of owners then, the trend showed some easing compared to previous months. Fast forward to September 2023, and optimism again dipped by half a point to 90.8, marking the 21st consecutive month below the 49-year average of 98. Inflation remained the top problem for 23% of owners in 2023, tied with labor quality. The 2025 decline to 98.8, while numerically higher than 2022 and 2023, represents a significant fall from recent highs, putting it back in a precarious position given the heightened uncertainty.
Inflation and Operating Costs: The Enduring Challenge
Inflation continues to be a formidable adversary for small business owners. In September 2025, 14% of owners identified inflation as their single most important problem due to escalating input costs, a three-point increase from August. This concern manifests directly in pricing strategies, with the share of owners raising average selling prices increasing by three points to 24%. The NFIB noted that these price increases “remain above the monthly average of a net 13%.” Additionally, a rising proportion of businesses reported battling supply chain disruptions. These cost pressures are reportedly exacerbated by President Donald Trump’s sweeping tariffs on imports, with a recent threat of 100% duties on Chinese imports likely fueling further anxiety among businesses (as reported by Reuters).
Looking back at September 2023, the picture was similar, with a net 29% of owners raising average selling prices, a level described as “very inflationary.” Price hikes were most prevalent in sectors such as finance (75%), construction (53%), and retail (49%). These historical patterns underscore the persistent, multi-year struggle small businesses have faced in managing rising costs.
The Shadow of Government Shutdown and Policy Uncertainty
The ongoing political standoff in Washington, which has resulted in a lapse in government funding and entered its third week by mid-October 2025, has significantly impacted economic data collection. This has forced investors and policymakers to rely heavily on private surveys like the NFIB report to gauge the economy’s health. While the closely watched employment report for September 2025 has been delayed, September’s consumer price data is still scheduled for release to facilitate the Social Security Administration’s annual cost-of-living adjustment for 2026. This environment of legislative gridlock and delayed data only amplifies the already high levels of uncertainty cited by business owners.
Labor Markets, Sales, and Inventories: Mixed Signals
The September 2025 survey also presented a mixed bag of signals regarding labor markets, sales, and inventories. Approximately 31% of owners planned to raise prices in the next three months, up five points from August. More businesses reported declining sales, and the share expecting higher inflation-adjusted sales dropped four points. Consequently, unsold merchandise is accumulating, which is often a worrying indicator for economic health.
For context, in September 2023, 43% of owners reported job openings they could not fill, a persistent challenge. Owners’ plans to raise compensation had declined slightly, but a net 36% still reported raising it. Sales figures in 2023 also painted a subdued picture, with a net negative 8% reporting higher nominal sales in the past three months, though this was an improvement from August 2020 lows. Inventory levels in 2023 showed more surplus stocks, with a net negative 4% viewing current inventory as “too low.” These historical data points suggest that while the specifics shift, the underlying themes of labor shortages, sales struggles, and inventory management remain central to small business operations.
Dunkelberg’s Economic Outlook and Community Concerns
Bill Dunkelberg’s commentary often provides a nuanced view of the broader economy. For September 2025, he highlighted that “solid consumption spending appears to be from the top third of the income distribution and the stock market keeps setting new record highs, producing capital gains income for shareholders.” This indicates a bifurcated economy where certain segments are thriving, while Main Street businesses face significant headwinds. The community perspective often echoes these concerns, with survey respondents specifically complaining about higher beef prices, health insurance costs, and taxes. Clients are also “choosing to delay or forgo repairs or improvements due to lack of confidence in the overall economy,” a direct reflection of broader consumer apprehension.
In September 2023, Dunkelberg similarly noted that “owners remain pessimistic about future business conditions” and that “sales growth among small businesses have slowed and the bottom line is being squeezed, leaving owners few options beyond raising selling prices for financial relief.” This consistent messaging over the years from the National Federation of Independent Business (NFIB) underscores the systemic challenges faced by small businesses. The community discussions around these reports frequently revolve around the ethical debates of businesses being forced to raise prices, the impact on local communities, and the efficacy of government policies in supporting small enterprises.
Long-Term Implications for Main Street
The sustained pessimism and rising inflationary pressures reported in September 2025 carry significant long-term implications for the small business sector. When owners face squeezed profits, higher interest rates, and difficulties securing financing (as noted in the 2023 NFIB report, where 4% cited financing as a top problem and average short-term loan rates hit 9.8%), investment in their firms tends to slow. This underinvestment can hinder growth, innovation, and job creation, weakening the very core of the economy.
The shift in growth drivers towards “AI-related investments” rather than “spending that impacts Main Street firms” also suggests a widening gap between tech-driven economic expansion and the realities of traditional small businesses. For a resilient economy, a healthy small business sector is paramount. The current trend suggests that without targeted policy changes and a more stable economic environment, Main Street could continue to face an uphill battle against inflation, uncertainty, and declining consumer confidence.
