LIVE MARKETS-Small businesses, still plagued by uncertainties, turn optimistic amid price hike plans

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SMALL BUSINESSES, STILL PLAGUED BY UNCERTAINTIES, TURN OPTIMISTIC AMID PRICE HIKE PLANS

The mood among small business owners in the U.S. improved in May for the first time since January, according to the National Federation of Independent Business (NFIB).

NFIB's Optimism index USOPIN=ECI clawed back 3 points to land at 98.8, peeking above its 51-year average of 98 amid waning uncertainties related to President Trump's erratic policies.

But those uncertainties haven't completely gone away.

"Although optimism recovered slightly in May, uncertainty is still high among small business owners,” writes Bill Dunkelberg, NFIB's chief economist. “While the economy will continue to stumble along until the major sources of uncertainty are resolved, owners reported more positive expectations on business conditions and sales growth."

Digging deeper, the uncertainty index ticked higher, in fact. But that was offset by rosier expectations for sales and business conditions. Among survey participants, 22% plan capex over the next six months, the highest reading so far this year.

Taxes have replaced labor quality and inflation as the "most important problem."

This sentiment rebound coincided, unsurprisingly with a rebound in the Russell 2000 .RUT, which took a sharp dive in the aftermath of Trump's market rattling "liberation day" tariff announcement.

“Taxes now represent the most important problem cited by firms, and key investment incentives in the Republican tax bill are likely on the minds of small businesses," says Bernard Yaros, lead U.S. economist at Oxford Economics. "Getting the timing of the tariff impact on prices right has been tricky, and the NFIB survey shows a slow, but steady, increase in the percent of firms planning to raise their selling prices.”

The graphic below shows intentions to raise prices are higher than they've been in over a year, even as inflation worries (and inflation itself) subsides.

It should be noted that NFIB is a politically active membership organization, whose PAC skews heavily Republican, according to the Center for Responsive Politics/opensecrets.org.

(Stephen Culp)

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