Small business optimism declined in March as profit trends worsened and uncertainty climbed, according to a survey released Thursday by the National Federation of Independent Business.
The NFIB Small Business Optimism Index fell 3.0 points in March to 95.8, dropping below its 52-year average of 98.0 for the first time since April 2025. The NFIB Uncertainty Index rose 4 points from February to 92, well above its historical average of 68.
NFIB Chief Economist Bill Dunkelberg attributed the decline in part to rising energy costs, even as recent federal tax legislation offered some support.
“The 20% Small Business Deduction and other supportive small business tax provisions in the Working Families Tax Cut Act have had many positives for small business owners,” Mr. Dunkelberg said. “However, the dramatic spike in oil prices has spooked consumers and owners alike. Small business owners are having to absorb those higher input costs and pass them along to their customers.”
NFIB Iowa State Director Logan Shine said Iowa’s small business community is feeling the effects.
“Iowa’s small business owners are feeling the squeeze of rising energy costs on their bottom lines,” Mr. Shine said. “Making the 20% Small Business Deduction permanent helped instill more confidence on Main Street, but small businesses will need more relief to combat gas prices and supply chain disruptions.”
Profit trends drove the sharpest decline among the index components. The frequency of reports of positive profit trends fell 11 points from February to a net negative 25%, seasonally adjusted. Among owners reporting lower profits, 32% blamed weaker sales, 19% cited usual seasonal changes, and 11% cited price changes for their products or services.
The net percent of owners expecting better business conditions fell 7 points from February to a net 11%, seasonally adjusted — the third consecutive monthly decline and the lowest level since October 2024.
Actual sales also weakened. A seasonally adjusted net negative 5% of owners reported higher nominal sales in the past three months, down 6 points from February, ending four consecutive months of improvement.
Supply chain disruptions continued to weigh on operations, with 62% of owners reporting some degree of impact in March, up 3 points from February. Of those affected, 17% reported a moderate impact, 42% a mild impact, and 3% a significant impact.
Capital spending intentions declined to their lowest level since November 2009. Sixteen percent of owners, seasonally adjusted, said they plan capital outlays in the next six months, down 2 points from February. Actual capital expenditures have fallen 9 points since the start of the year.
On employment, the NFIB Small Business Employment Index fell 1.9 points from February to 101.6, though the reading remains above both the 2025 average of 101.2 and the historical average of 100. A seasonally adjusted 32% of owners reported job openings they could not fill in March, down 1 point from February but still above the historical average of 24%.
A seasonally adjusted net 33% of owners reported raising compensation in March, down 1 point from February. A net 18% plan to raise compensation in the next three months, down 4 points from February and the lowest reading since July 2025.
Actual selling prices picked up after three months of decline, with the net percent of owners raising average selling prices rising 1 point to a net 25%, seasonally adjusted. Planned price increases fell 4 points to a net 24%, the lowest level since July 2024.
Eleven percent of owners said March was a good time to expand, down 4 points from February and below the historical average — the first such decline in six months.
Taxes ranked as the top concern among business owners, cited by 19% as their single most important problem. Labor quality ranked second at 15%, while inflation moved up to third at 14%, rising 2 points from February.
The NFIB has collected Small Business Economic Trends data through quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. Survey respondents are drawn randomly from the NFIB’s membership, and the report is released on the second Tuesday of each month. This survey was conducted in March 2026.
