By Ethan Faverino |

The National Federation of Independent Business (NFIB) Small Business Optimism Index dropped 2 points in September to a score of 98.8, marking the first decline in three months.

Despite remaining above the 52-year average of 98, the dip reflects growing concerns among small business owners grappling with inflationary pressures, supply chain disruptions, and persistent labor shortages. The Uncertainty Index climbed 7 points to 100, making it the fourth-highest reading in over 51 years.

NFIB Chief Economist Bill Dunkelberg said, “Optimism among small business owners decreased in September. While most owners evaluate their own business as currently healthy, they are having to manage rising inflationary pressures, slower sales expectations, and ongoing labor market challenges. Although uncertainty is high, small business owners remain resilient as they seek to better understand how policy changes will impact their operations.”

In Arizona, small business owners echoed with national concerns: “Unfortunately, Arizona small business owners are facing the same sort of challenges we see in the national survey,” NFIB State Director Chad Heinrich said. “The ongoing labor shortage and inflationary pressures are giving small business owners pause in this economy. They’re focused on meeting their customers’ needs and retaining their workforce.”

Key findings from the September survey include:

• Inflation and Supply Chains: Inflation emerged as a significant issue, with 14% of owners citing it as their top business problem, up 3 points from August. A net 24% raised selling prices, up 3 points, and a net 31% plan to increase prices in the next three months, up 5 points. Supply chain disruptions impacted 64% of owners, a 10-point jump from August.
• Labor Market Struggles: 32% of owners reported unfilled job openings, unchanged from August. Of the 58% that are hiring or trying to hire, 88% faced a shortage of qualified applicants. A net 16% plan to create jobs in the next three months (up 1 point) is the highest since January 2025. Labor quality is tied with taxes as the top concern, cited by 18% of owners.
• Inventory and Sales: A net negative 7% viewed current inventory as “too low,” down 7 points—the largest monthly decline in the survey’s history. A net negative 7% reported higher nominal sales over the past three months, up 2 points, but a net 8% expect higher real sales volumes (down 4 points).
• Earnings and Investments: Actual earnings improved, with a net negative 16% reporting profit trends, up 3 points, and the highest since December 2021. Among those with lower profits, 33% cited weaker sales and 17% pointed toward material costs. Capital outlays remained steady, with 56% of owners reporting expenditures, primarily on equipment and vehicles.
• Financing Challenges: A net 7% reported tougher loan conditions, up 4 points and the highest this year. The average rate on short-maturity loans rose 8.8%. Regular borrowing increased, with 26% of owners reporting loans, up 3 points.

Despite these challenges, 57% of owners rated their business health as “good,” up 3 points, while 11% said “excellent,” down 3 points.

Taxes and labor quality tied as the top concerns, each cited by 18% of owners, while poor sales (10%) and government regulations (6%) remained notable issues.

Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.