Small Business Capex Divergences

Feb 10, 2026

This morning, the National Federation of Independent Business (NFIB) published their monthly read on small business sentiment.  As shown below, the headline index was pretty much uninteresting with a marginal drop of 0.2 points to 99.3. This index has now consistently been narrowing following the surge in response to the 2024 election, and the latest reading is not only in the middle of that post-election range, but also in the middle of the historical range, ranking in the 49th percentile.

While the headline index isn’t jumping off the page, there have been some interesting details under the hood. The January drop in the index occurred on weak breadth as six of the nine inputs fell month over month.  Non-inputs to the Optimism Index saw stronger breadth, with five of the eight indices rising.

Among several topics we discussed in our Morning Lineup today, we noted how labor market indices included in the NFIB report have been trending in the right direction. In the charts below, we show a more granular look at each of the six relevant indices to this category.  As shown, hiring and compensation plans did fall in January, but that was counteracted by observed upticks in actual employment and compensation. For actual employment changes, January saw a net positive reading (meaning firms saw net hiring during the month) for the first time since last April. Further, since 2020, positive readings have also been somewhat uncommon, only occurring 17.8% of the time.

While those readings were not at any sort of significant high, this month’s report saw the lowest share of respondents reporting jobs as hard to fill since July 2020. Additionally, labor was cited as the biggest single problem for only a quarter of firms, tying last May for the lowest share since May 2020.

Looking to the other side of the production function, capex has seen an interesting divergence.  Capex plans dropped to 18 for the joint lowest reading since 2010.  Conversely, actual capital expenditures have risen sharply, hitting the high end of the past few years’ range.

In the breakdown of spending, equipment seems to be the driving force of that capex spend. That category registered its strongest reading since May 2021, while vehicle spending has also remained elevated.

The share of firms viewing now as a good time to expand was middling versus history, as that index is in the 52nd percentile following a 2-point jump in the index to 15. As shown below, economic conditions are the predominant reason for both negative and positive expansion outlooks.  While the former has seen that reason fall to the low end of its recent range, those pointing to the economy as a reason to expand hit the highest level in nearly five years.

Finally, we would note that there was a 4-point drop in the index for higher prices, and the share of respondents reporting inflation as their biggest problem was unchanged at 12%. In other words, inflation did not appear to see any dramatic increase in importance. However, a related series showing the share of respondents reporting cost or availability as their biggest problem has surged up to 13%, tying December 2018 for the highest reading since August 2008.