In October 2024, NFIB’s Small Business Optimism Index (not seasonally adjusted) rose from 96.3 to 104.7 in November. Questionnaires were mailed out on October 31st, so some of the early November respondents may not have known the election results. Even so, the increase in the overall Index was dramatic, up 8.4 points. The Index increased in November for all industries, although to different degrees. For firms in the wholesale and finance industries, the election had only a small impact on optimism. Expected Federal Reserve policy was likely a major concern. For professional service firms, the election results were very uplifting (Index up 14.7 points), likewise for the production sector (construction, manufacturing, and transportation).
The percent of firms viewing the “current period” as a good time to expand small businesses tripled to 12%, led by firms in construction, wholesale trades, professional services, and finance and real estate. Regulatory policies impact the availability of buildable land, materials costs, and labor. Apparently, builders expect these costs and restrictions to be significantly lower in the new administration. Mortgage rates may also decline if government policies better manage government spending and borrowing. The Fed has been cutting its policy rate but the yield on the 10-year Treasury Bond has been rising, keeping mortgage rates from falling. Small business borrowers have seen borrowing costs fall from 10.1% in September to 8.7% on average in December.
Good Time to Expand by Industry. NFIB Small Business Economic Trends.
So, small businesses enter 2025 full of optimistic energy, hopefully transformed into economic growth by the new administration’s policies. There will be a lot of rebuilding in California, Florida, and North Carolina, but that will be replacing lost assets, not adding to our capital stock. But small business owners are the best at overcoming adversity, and they will move the economy forward.
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