The National Federation of Independent Business Small Business Optimism Index fell 0.5 points in February to 98.8 but remained slightly above the 52-year average of 98. The Uncertainty Index fell 3 points from January to 88.
“Although optimism declined slightly, small businesses report feeling more certain in February as they look toward the coming months,” NFIB Chief Economist Bill Dunkelberg said. “High sales and increased profits made February a more positive month for many owners, but competition from large businesses is putting stress on Main Street firms as they navigate the current economic climate.”
NFIB State Director Rosemary Elebash said the numbers reflect what Alabama small business owners are seeing.
“Sales are improving, but costs are increasing, too,” Elebash said. “That makes it hard for many small businesses to grow and plan ahead.”
In conjunction with the February report, NFIB also released a new episode of the NFIB Research Center’s “Small Business by the Numbers” podcast.
Key findings from the federal report include:
- The Employment Index rose nearly 1 point in February to 103.5, which is 3.5 points above its historical average of 100 and 2.3 points above its 2025 average. Compensation-related components, rather than employee-count components, drove the increase.
- Fifteen percent of small business owners cited labor quality as their single most important problem, down 1 point from January and the fourth consecutive monthly decline. Labor quality has not ranked this low since April 2020.
- A seasonally adjusted net 1 percent of owners reported higher nominal sales in the past three months, up 7 points from January. Actual sales gains are now close to the historical average of a net 0 percent. Actual sales have not been this high since May 2022.
- The net percent of owners expecting higher real sales volumes fell 8 points from January to a seasonally adjusted net 8 percent, erasing January’s 6-point gain.
- In February, 59 percent of small business owners said supply chain disruptions affected their business to some extent, down 3 points from January.
- The net percent of owners raising average selling prices fell 2 points from January to a seasonally adjusted net 24 percent. That marked the third consecutive month of slower actual price increases, though changes remain well above the historical average.
- A seasonally adjusted net 34 percent reported raising compensation, up 2 points from January and the highest level since March 2025.
- The frequency of positive profit trend reports rose 7 points from January to a seasonally adjusted net negative 14 percent. Earnings trends have not been this high since December 2021.
- When asked to evaluate the overall health of their business, 12 percent rated it excellent, down 2 points; 55 percent rated it good, up 1 point; 26 percent rated it fair, down 1 point; and 5 percent rated it poor, up 1 point.
- Eight percent reported competition from large businesses as their single most important problem, up 2 points from January. That issue has not been this high since May 2021.
As NFIB reported in its monthly jobs report, the NFIB Small Business Employment Index rose nearly 1 point from January to 103.5, showing further tightness in the small business labor market. The reading is 2.3 points above the 2025 average of 101.2 and 3.5 points above the historical average of 100.
A seasonally adjusted 33 percent of small business owners reported job openings they could not fill in February, up 2 points from January. Of the 54 percent of owners hiring or trying to hire in February, 85 percent reported few or no qualified applicants for the positions they were trying to fill. A seasonally adjusted net 12 percent of owners plan to create new jobs in the next three months, down 4 points from January and the lowest level since May 2025, though still close to the average of a net 11 percent.
Nine percent of owners said labor costs were their single most important problem, unchanged from January. A seasonally adjusted net 34 percent reported raising compensation, up 2 points from January and the highest level since March 2025. A seasonally adjusted net 22 percent plan to raise compensation in the next three months.
Fifty-four percent of owners reported capital outlays in the past six months, down 6 points from January. Of those making expenditures, 37 percent spent on new equipment, 28 percent acquired vehicles and 15 percent improved or expanded facilities. Ten percent spent money on new fixtures and furniture, and 5 percent acquired new buildings or land for expansion. A seasonally adjusted 18 percent plan capital outlays in the next six months, unchanged from January.
A seasonally adjusted net 1 percent of owners reported higher nominal sales in the past three months, up 7 points from January. Actual sales have not been this high since May 2022. While actual sales volumes rose in February, sales expectations declined. The net percent of owners expecting higher real sales volumes fell 8 points from January to a seasonally adjusted net 8 percent. The percent of owners reporting poor sales as their top business problem rose 2 points from January to 11 percent.
The net percent of owners reporting inventory gains fell 6 points from January to a seasonally adjusted net negative 3 percent, likely because of increased sales. Not seasonally adjusted, 10 percent reported increases in stocks and 18 percent reported reductions. A seasonally adjusted net negative 2 percent of owners viewed current inventory stocks as too low in February, up 1 point from January. A seasonally adjusted net negative 2 percent of owners plan inventory investment in the coming months, unchanged from January despite the surge in sales and resulting inventory reductions.
A seasonally adjusted net 28 percent plan price hikes in the coming months, down 4 points from January. The net percent of owners raising average selling prices fell 2 points from January to a seasonally adjusted net 24 percent. Unadjusted, 35 percent of owners reported higher average selling prices and 11 percent reported lower average prices. Both planned hikes and actual price changes remain above their historical averages.
Twelve percent of owners reported inflation as their single most important problem in operating their business, unchanged from January and ranking as the third-leading issue.
The frequency of positive profit trend reports was a seasonally adjusted net negative 14 percent, up 7 points from January and the highest reading since December 2021. Among owners reporting lower profits, 28 percent blamed weaker sales, 19 percent cited usual seasonal change, 13 percent blamed rising material costs, 9 percent cited changes in the price of their product or service, 7 percent cited labor costs and 7 percent cited insurance costs. Among owners reporting higher profits, 61 percent credited sales volumes, 12 percent cited higher selling prices and 11 percent cited usual seasonal change.
Twenty-five percent of owners reported borrowing regularly, unchanged from January. A net 5 percent said their last loan was harder to get than in previous attempts, up 2 points from January, and a net negative 3 percent said they paid a higher rate on their most recent loan, up 3 points. Four percent of owners said financing and interest rates were their top business problem in February.
In February, the net percent of owners expecting better business conditions fell 3 points from January to a seasonally adjusted net 18 percent. That remains well above the historical average of a net 4 percent.
A seasonally adjusted 15 percent of owners said February was a good time to expand their business, unchanged from January. When asked to rate the overall health of their business, 12 percent said excellent, down 2 points, and 55 percent said good, up 1 point. Twenty-six percent said fair, down 1 point, and 5 percent said poor, up 1 point.
The percent of owners reporting taxes as their single most important problem rose 1 point in February to 19 percent. Ten percent cited government regulations and red tape as their top issue, and 9 percent cited the cost or availability of insurance.
The NFIB Research Center has collected Small Business Economic Trends data through quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. NFIB randomly draws survey respondents from its membership. The group releases the report on the second Tuesday of each month. NFIB conducted this survey in February 2026.
