The NFIB Small Business Optimism Index rose to 98.8 in May, marking its first monthly increase since December 2024. This three-point jump brought the index above the long-term 51-year average of 98, signaling renewed small business optimism after two months below the benchmark. The upward trend followed a notable May 12 agreement between the U.S. and China, which helped ease trade tensions that had contributed to economic uncertainty.
According to the National Federation of Independent Business (NFIB), the percentage of business owners expecting better economic conditions climbed 10 points to 25%. The share anticipating higher inflation-adjusted sales also jumped 11 points to a net 10%, indicating improved short-term expectations for revenue growth.
Trade Truce Sparks Small Business Optimism
While the optimism index showed positive movement, the NFIB’s Uncertainty Index also ticked up in May. Small business owners remain wary of unresolved issues including lingering tariffs and the uncertain fate of a proposed legislative package, known as the “Big Beautiful Bill,” which has yet to clear Congress.
Inventory shortages added another layer of concern. The net percent of owners reporting current inventory levels as “too low” increased by seven points, reaching the highest mark since March 2023. These shortages could signal upcoming price hikes and supply chain constraints heading into summer.
Mixed Outlook as Summer Begins
Despite increased small business optimism, challenges persist. The NFIB continues to highlight ongoing struggles with finding qualified labor, managing costs, and navigating federal policy uncertainty. While owners are generally more positive about sales and business conditions, these broader issues are keeping pressure on hiring plans and capital investment.
The May improvement in the optimism index offers a hopeful sign, but not a full recovery. NFIB Chief Economist Bill Dunkelberg emphasized that optimism levels still reflect a business climate with significant headwinds, especially for smaller firms that are more vulnerable to regulatory changes and inflation shocks.
Local Entrepreneurs Reflect National Small Business Optimism
For business owners across the San Gabriel Valley, including El Monte, Rosemead, and Baldwin Park, the rise in optimism offers a cautiously positive signal. Local entrepreneurs can interpret the national trend as a reflection of easing external pressures, such as international trade and inflation, while still preparing for volatility in inventory costs and workforce availability.
The index’s movement above the long-term average suggests that despite ongoing uncertainty, the business environment is gradually improving. Entrepreneurs in the region may find this an opportune time to revisit hiring strategies, reassess inventory needs, and monitor legislative developments that could further impact small business operations.
The NFIB Small Business Optimism Index’s rise to 98.8 in May reflects improved expectations among U.S. business owners, driven partly by progress in U.S.-China trade negotiations. However, rising uncertainty and inventory pressures show that challenges remain. Local businesses in the San Gabriel Valley should remain alert but hopeful, as broader economic confidence begins to rebuild. For full data and analysis, visit the NFIB Small Business Economic Trends Report.
