US Small Business Optimism Rises in May But Concerns Grow Over Political Uncertainty Near Election

Small busi­ness con­fi­dence in the US econ­o­my increased slight­ly in May accord­ing to a sur­vey, but own­ers remain wor­ried about how polit­i­cal issues like the upcom­ing midterm elec­tions could impact their businesses.

The Nation­al Fed­er­a­tion of Inde­pen­dent Busi­ness (NFIB)‘s Opti­mism Index rose 0.9 points to 93.1 last month, exceed­ing ana­lysts’ expec­ta­tions. This indi­cates that more own­ers viewed cur­rent eco­nom­ic con­di­tions as good and expect­ed high­er sales in the near future.

How­ev­er, infla­tion pres­sures con­tin­ue weigh­ing heav­i­ly on small com­pa­nies as the prices they pay for mate­ri­als rose at the fastest rate in over 40 years. Own­ers are hav­ing to raise their own prices to main­tain mar­gins, which could damp­en con­sumer demand.

Look­ing ahead, uncer­tain­ties relat­ed to the Novem­ber midterm elec­tions adding to con­cerns. Own­ers report­ed more pes­simism about future busi­ness con­di­tions and eco­nom­ic pol­i­cy issues like tax­es and reg­u­la­tions. They expect law­mak­ers to pri­or­i­tize polit­i­cal agen­das over pro-busi­ness reforms in the run-up to voting.

The data shows small firms remain resilient but risks to the out­look are mount­ing. With demand for goods and ser­vices strong so far, opti­mism could keep ris­ing in the near-term. But ongo­ing infla­tion and grow­ing elec­tion uncer­tain­ty cloud the prospects for small busi­ness con­fi­dence and invest­ment over the rest of the year.