The Small Business Optimism Index released by the National Federation of Independent Business dropped 3 points in March to 95.8, falling well short of market expectations of 97.9, and now below its 30-year average of 97.4. The index has dropped for the third month in a row and is now at levels last seen during the initiation of tariffs last year, with negative profit trends contributing most to the decline. Uncertainty increased sharply, with the NFIB Uncertainty Index jumping 4 points to 92, driven largely by more owners reporting uncertainty about business conditions and capital expenditures, and well above its 30-year average of around 72.
The ABA Office of the Chief Economist believes that the March report points to a mixed near-term outlook for small-business credit demand. The sharp drop in optimism and increase in uncertainty can be tied to the concerns around the impact of the conflicts in the middle east and the effects on supply chains like energy, chemicals and fertilizers. Firms are reporting slightly negative credit conditions but are also seeing lower interest rates. Elevated uncertainty and weak forward-looking investment plans suggest firms remain cautious about taking on new commitments.
