Small businesses gain optimism in October

Wells Fargo Research Team Wells Fargo

Summary

Looking past the headline jump, signs of weakness persist

The start of the Fed's easing cycle appeared to give small business owners a dose of optimism in October, while expectations surrounding November's election also likely played a role. The NFIB Small Business Optimism Index rose 2.2 points to 93.7, tied with July for the biggest over-the-month jump this year. Most components improved over the month, the most substantial being a seven-point surge in expectations for better business conditions. Yet, looking past the headline improvement in optimism, the underlying details suggest that small businesses are standing on shaky economic ground. Small business sales plummeted to its weakest reading since July 2020 while labor demand continued to deteriorate. Although hurricanes Helene and Milton likely explain softer hiring in October, plans for future hiring also continued to stall, remaining essentially unchanged since May. On the upside, inflation pressures continued to slowly ease, and the Fed’s first rate cut in September seems to already be improving borrowing conditions for small businesses.

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Wells Fargo Research Team

Wells Fargo

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