Small business owners were feeling uncertain in March even before Trump’s “Liberation Day” reciprocal tariff announcements shook markets and sparked broad fears about the prospect of a US recession.
The National Federation of Independent Business’s optimism index dropped by 3.3 points in March to 97.4, marking the biggest monthly decline since June 2022. This was just above economists’ forecasts, which predicted a reading of 99, according to Bloomberg data.
This drop pushes the index below its 51-year average of 98 just three months after reaching a near-record high of 105.1 in December.
“The implementation of new policy priorities has heightened the level of uncertainty among small business owners over the past few months,” NFIB chief economist Bill Dunkelberg said in a statement.
In early March, Trump rolled out the first phase of his new tariff plans, putting levies on imports from Canada and Mexico.
“Small business owners have scaled back expectations on sales growth as they better understand how these rearrangements might impact them,” Dunkelberg added.
Tuesday’s data showed the drop in optimism largely driven by a 16-point fall in expectations for better market conditions over the next six months. The NFIB’s uncertainty index also fell by 8 points from February.
Expectations for business conditions and sales continued to slide.
The percentage of owners anticipating better business conditions dropped 16 points to just 21%, marking the third consecutive monthly decline and the biggest drop since December 2020.
Additionally, the number of owners expecting higher sales volumes fell 11 points to just 3%, continuing a downward trend for the third month in a row.
Notably, the report didn’t mention tariffs.
Among the owners who reported lower profits, 35% blamed weaker sales, 11% said the decline was due to the increased cost of materials, and 8% cited rising labor costs.
About 16% of owners said inflation was a significant issue hindering their business, unchanged from February but falling in its ranking.
Labor remains a major challenge, with 40% of owners reporting unfilled job openings, up two points from February. Meanwhile, only 12% of owners plan to create new jobs in the next three months, a three-point drop from February and the lowest level since April 2024.
“As the deck chairs continue to move, it will be a turbulent time, even on Main Street,” Dunkelberg said.
Dani Romero is a reporter for Yahoo Finance. Follow her on X @daniromerotv.
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