Small business optimism on the upswing

Wells Fargo Research Team Wells Fargo

Summary

Outlooks brighter, but Fed cuts still incoming

The NFIB Small Business Optimism Index rose to 93.7 in July, its highest reading since February 2022. It’s hard to mistake this four-month string of upticks for anything other than a trend improvement in sentiment. Although the index remains below its 50-year average of 98, the outlook for business conditions shot up 18 points in July, driven by brighter sales expectations. Yet, the underlying details continue to reveal hesitancy about the demand outlook amid a cloudy economic and political landscape. The clearest takeaways from July’s survey are vital for the Fed: labor demand continues to ease and price pressures continue to fade. These soft elements of the survey measures, in concert with hard data on inflation and nonfarm payrolls, support our view that the Federal Reserve will begin cutting its policy rate next month at the September meeting.

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Wells Fargo Research Team

Wells Fargo

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