First recovery this year! US small business confidence picked up in May, tariffs and tax bills became a hidden concern

The Zhitong Finance App learned that in May 2025, confidence in American small businesses picked up for the first time this year, and businesses' optimism about the economic outlook has heated up. According to data released by the American Federation of Independent Businesses (NFIB) on Tuesday, its optimism index climbed 3 points to 98.8. Seven of the 10 indicators covered by the survey improved, mainly due to improvements in companies' expectations for the business environment and actual sales.

Despite this, the uncertainty index is rising at the same time, highlighting the bumpy process of implementing President Donald Trump's tariff policy, as well as additional controversy caused by his iconic tax bill as it progressed in Congress. According to the survey, for the first time since the end of 2020, tax issues have become the top challenge faced by enterprises.

NFIB chief economist Bill Dunkelberg (Bill Dunkelberg) stated in a statement: “Despite a slight recovery in confidence in May, uncertainty among small business owners is still high.”

This rebound in the confidence index ended one of the longest periods of decline in the past decade, and coincided with a general easing of trade tension — China and the US suspended implementation of extreme tariff measures, and the two sides are trying to reach a more lasting solution and resolve other trade issues through negotiations.

This temporary agreement may inject confidence into corporate investment. The proportion of companies planning to spend capital in the next few months has risen to the highest level this year, but it is still close to the low level since the beginning of the pandemic.

Economists generally expect tariffs to drive up inflation. 31% of small businesses with a net share said they plan to increase prices within the next three months, the highest level in more than a year. The Consumer Price Index (CPI), which is due to be released on Wednesday, is expected to show an increase in core inflation in May after excluding food and energy prices.

Although companies are more optimistic about sales prospects, 13% of companies reported a decline in sales over the past three months. This ratio is a significant increase from 8% in April, the biggest increase since October 2023. Furthermore, companies generally still report that loans are difficult and expect credit conditions to be further tightened in the next three months.

Labor market dynamics are showing signs of easing, and recruitment plans are close to their lowest level since the beginning of the pandemic. 26% of companies with a net share said they have raised their pay in recent months, the lowest reading since February 2021. The NFIB survey was based on responses from 485 small businesses collected throughout the month, and the response rate was 9.7%.