Small business optimism increased in December 2025, according to the latest report from the National Federation of Independent Business (NFIB). The NFIB Small Business Optimism Index rose by 0.5 points to 99.5, remaining above its long-term average. The Uncertainty Index dropped seven points to 84, marking its lowest level since June 2024.
“2025 ended with a further increase in small business optimism,” said NFIB Chief Economist Bill Dunkelberg. “While Main Street business owners remain concerned about taxes, they anticipate favorable economic conditions in 2026 due to waning cost pressures, easing labor challenges, and an increase in capital investments.”
Chad Heinrich, NFIB State Director for Arizona, highlighted the importance of state legislative support for tax conformity bills. “With the state legislative session starting this week, NFIB is urging lawmakers to support the Arizona tax conformity bills (HB 2153 and SB 1106) to deliver tax certainty to small businesses,” Heinrich said. “The federal tax bill delivered certainty to small businesses—allowing them to grow their operations with confidence. Without state legislative action to conform to the federal law, confidence will wane, and business owners will hold off on plans to expand and hire employees. By conforming with the federal tax law, hardworking Arizona small business owners will have the opportunity to grow their businesses and support over 1 million employees across Arizona.”
The survey found that taxes were cited as the most significant problem by 20% of respondents—the highest rate since May 2021—and up six points from November. Both actual and planned price increases declined from previous months; a net 30% reported raising prices while a net 28% plan further increases in early 2026.
Interest rates appeared less burdensome compared to prior months; a net negative three percent of owners reported paying higher interest rates on recent loans—the lowest figure since January 2021.
Expectations for better business conditions improved: “The net percent of owners expecting better business conditions rose 9 points from November to a net 24% (seasonally adjusted), contributing the most to the rise in the Optimism Index. This was the first increase since July.” When evaluating overall business health, nine percent rated it excellent while more than half considered it good.
Job market data remained steady with one-third of small business owners reporting unfilled job openings—well above historical averages—and most citing difficulty finding qualified applicants.
More than half (56%) made capital outlays over the last six months—a slight increase—with notable spending on equipment, vehicles, facility improvements, fixtures or furniture, and real estate acquisitions.
Sales performance showed some improvement but stayed below historic norms; only a net negative eight percent reported higher sales over three months. Inventory gains reached their highest point for the year despite overall investment plans staying flat.
Supply chain disruptions continued affecting nearly two-thirds of businesses at varying levels but shifted toward more moderate or mild impacts compared with earlier periods.
Profit trends reflected ongoing challenges: “Among owners reporting lower profits, 41% blamed weaker sales… Among owners reporting higher profits, 64% cited sales volume…” Borrowing remained historically low even as some metrics indicated slightly easier access or terms compared with prior reports.
Inflation concerns eased somewhat—12% listed it as their top issue—but price hikes persisted above typical levels for recent years. Labor quality and costs also remained prominent issues for many firms surveyed.
NFIB’s monthly survey has tracked these trends among randomly selected members since its inception decades ago and continues releasing findings each month.
