Key Takeaways

  • A survey released Tuesday by the National Federation of Independent Business (NFIB) showed that surging energy prices last month pushed small business optimism to its lowest level since October 2024.
  • "More small business owners are struggling to cope with significant and unpredictable increases in fuel prices, and compared to their larger competitors, small businesses find it harder to pass these costs on to customers," NFIB Chief Economist Bill Dunkelberg said in a statement.
  • Job openings and hiring plans fell to a six-year low, with 14% of small business owners citing labor costs as their top problem, which NFIB said was the highest reading since the survey began in 1973.

Deeper Insights

Inflation has accelerated in recent months, driven by tariffs at their highest levels since the 1930s and a sharp drop in oil supplies after U.S. and Israeli airstrikes on Iran in late February.

Global BenchmarkBrent crude futureshave risen about 31% since the war broke out on February 28, climbing from $70 per barrel to $91.67 per barrel. Following that, according to AAA data,the average price of regular gasolinesurged from $2.91to $4.16, an increase of 43%.

"Gasoline prices remain far above pre-Middle East conflict levels, and these costs don't stay at the pump—they quickly transmit through supply chains, supplier pricing, and freight," Mark Valentino, head of commercial banking at Citizens Bank, said in a report Tuesday. He also noted that amid rising prices, the federal government has been slow to provide compensation to businesses for tariffs deemed illegal.

"The environment facing small businesses has not eased. Consumer confidence is near historic lows, sales are slowing, and margin pressures are re-emerging," Valentino said.

Small businesses could fuel inflation in the coming months. NFIB said the net proportion of owners planning to raise average selling prices rose to 34%, the highest since July 2022. Meanwhile, small business sales expectations fell to their lowest since April 2025.

A survey by the Federal Reserve Bank of New York also showed consumer expectations deteriorated further last month. The perceived probability of losing one's job rose above its 12-month average in May, while the perceived probability of finding a new jobfell to its lowest since December 2025. The regional Fed bank said Monday that households' views of their current financial situation (compared to a year ago) worsened, and expectations for their financial situation over the next year also weakened.