This year's first rebound! Small business confidence in the United States rebounded in May, with tariffs and tax legislation becoming hidden concerns.

In May 2025, the confidence of small businesses in the United States experienced its first increase of the year, with businesses feeling more optimistic about the economic outlook. Data released by the National Federation of Independent Business (NFIB) on Tuesday shows that its optimism index rose by 3 points to 98.8, with 7 out of 10 indicators improving, largely due to businesses' improved expectations for the operating environment and actual sales. However, the uncertainty index also increased, highlighting the rocky implementation of President Donald Trump's tariff policies and the additional controversies sparked by his landmark tax legislation in Congress. The survey revealed that tax issues have become the primary challenge facing businesses for the first time since the end of 2020. NFIB Chief Economist Bill Dunkelberg stated, "Although confidence in May has slightly rebounded, uncertainty among small business owners remains high." This rebound in confidence marks the end of one of the longest downward cycles in the past decade, and comes as trade tensions ease - with the US and China pausing extreme tariff measures and attempting to reach a more enduring solution through negotiations and address other trade issues. This temporary agreement may inject confidence into business investment, with the proportion of businesses planning capital expenditures in the coming months rising to the highest level this year, but still close to the lows seen since the beginning of the pandemic. Economists generally expect tariffs to increase inflation, with a net 31% of small businesses planning price increases in the next three months, reaching the highest level in over a year. The Consumer Price Index (CPI) scheduled for release on Wednesday is expected to show that core inflation in May, excluding food and energy prices, has increased. While businesses are more optimistic about sales prospects, a net 13% of businesses reported a decrease in sales over the past three months, significantly higher than the 8% in April and the largest increase since October 2023. Furthermore, businesses still find access to credit difficult, and expect credit conditions to tighten further in the next three months. Signs of a slowing labor market are evident, with hiring plans nearing their lowest levels since the beginning of the pandemic, and a net 26% of businesses reporting increases in wages in recent months, the lowest reading since February 2021. The NFIB survey is based on responses from 485 small businesses collected throughout the month, with a response rate of 9.7%.