WASHINGTON, D.C. — Confidence among America’s small businesses declined for a second straight quarter, signaling growing unease about the economic outlook amid rising inflation pressures and broader uncertainty, according to the U.S. Chamber of Commerce Small Business Index for Q1 2026.
The Index fell to 67.0, down slightly from 68.4 last quarter, marking a continued pullback from its recent high of 72.0 in Q3 2025. While the overall score remains above this time last year, the underlying data point to a sharper deterioration in sentiment—particularly around the national economy, inflation, and future investment and hiring.
“While many small businesses say their own operations remain stable, the data show a clear downturn in sentiment that shouldn’t be overlooked,” said Neil Bradley, EVP, Chief Policy Officer and Head of Strategic Advocacy at the U.S. Chamber of Commerce. “This survey was conducted largely after the outbreak of military conflict with Iran, and that uncertainty is clearly weighing on confidence. Views of the national and local economies have turned more pessimistic, concerns over inflation have jumped, and plans for future hiring and investment dropped markedly. Taken together, this suggests small business owners are worried about the future state of the economy, but it remains to be seen if this will translate into changes in their current operations.”
Divergence Between Own Operations and Larger Economy
The Q1 data reveal a notable divergence between how small businesses view their own operations and how they assess the broader economy. Nearly seven in ten small business owners (69%) continue to rate their business as being in good health. In contrast, confidence in the national and local economies has weakened considerably.
Only 28% of small business owners say the U.S. economy is in good health—down 10 points from last quarter—while 35% say their local economy is in good health, an 8-point decline. These readings are now back in line with levels seen a year ago.
“The biggest challenge facing our business right now is financial uncertainty in the economy which is causing tightening on discretionary spending,” says Chris Barber, a member of the U.S. Chamber’s Small Business Council and Chief Nerd at Cheaper Than A Geek, a computer support and IT services provider in Crofton, Maryland.
Hiring and Investment Plans Retreat
Small businesses are also growing more cautious about the future. Compared to last quarter, significantly fewer say they plan to expand payrolls or make new investments in the year ahead:
- 37% expect to increase investment, down from 44% last quarter
- 30% expect to increase staff, a 12-point drop from Q4 2025
- 61% expect increased revenue, slipping from 65% last quarter and 69% a year ago
The pullback in expectations underscores concerns that economic uncertainty is beginning to weigh on growth decisions—an early warning sign for broader economic momentum.
Inflation and Affordability Are Top Concerns
Inflation is the top challenge facing small businesses, with 53% citing it as their biggest concern—up from 45% last quarter. Inflation has now been the leading challenge for 17 consecutive quarters, spanning more than four years.
At the same time, worries over the cost of employee benefits are rising. Nearly one in five small businesses (19%) say affording employee benefits or health care is a top challenge—the highest level recorded since tracking began in 2023.
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About the Small Business Index
The U.S. Chamber of Commerce Small Business Index elevates the voice of America’s small business owners and highlights the important role they play in the nation’s economy. The quarterly Index conducted by Ipsos is designed to take the temperature of the sector, see where small business owners are confident, and where they are experiencing challenges.
The Q1 2026 survey was conducted online in English by Ipsos between February 25 – March 11, 2026. The survey has a sample size of 751 small business owners and operators age 18+ from the continental U.S., Alaska, and Hawaii.
