Early this morning, the NFIB published small business sentiment data for September. The Small Business Optimism Index ticked up from 91.2 to 91.5. While stronger, that wasn't as large of an uptick as was expected as the consensus forecast expected an increase to 92.0.Regardless, sentiment remains historically low in the bottom quintile of historical readings back to 1986.

In the table below, we show each category of the report including the previous month's reading, the month-over-month change in index points, and how those rank as a percentile of all periods of the survey's history.Breadth for components to the headline number was slightly positive with five categories rising, two going unchanged, and another three falling month over month.As for other categories, the results were much weaker. Of the non-inputs to the optimism index, only three components were higher versus five that declined.Across indicators, the vast majority are historically low—many ranking in the bottom decile of readings—save for some labor market-related points like Job Openings Hard to Fill, Compensation, and Compensation plans.With that said, those labor indices are also well off highs from recent years, and as we discussed in today's Morning Lineup, the past few months have seen stabilization in these indicators.

Of those indices that saw improvement in September, the largest MoM jump was in expectations for higher real sales.That index jumped from -18 in August to -9 in September. That ties July for the strongest reading of the year, albeit it is also the 33rd consecutive negative reading in this index, a record streak.While sales expectations improved materially, actual sales changes have continued to deteriorate falling 1 point to -17. That ties last November and October for the lowest readings since the pandemic.As actual top-line results have been reported as weaker, actual earnings changes improved from -37 to -34 even as the higher prices index rebounded a couple of points. Granted, even with that improvement, actual earnings changes continue to see some of the weakest readings in this index since the Great Recession.

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One other key area of weakness we noted in today's Morning Lineup concerned capex. Both actual and expected capex dropped in September.For plans, the index is down to 19 which is the lowest reading since April 2023 whereas actual capex at 51 hit its lowest since July 2022.

Finally, we would note that an auxiliary index to the report, the Economic Policy Uncertainty Index, is surging.This index tracking small business trepidation concerning economic policy typically rises during presidential election years; at that, those increases are usually far larger than non-election years.However, the 24-point leap over the past year through September is the largest YoY jump for that month of any year in the index's history, Presidential election year or otherwise, and the index itself is now at a record high.As we noted last month (see here and here), the NFIB survey typically has political sensitivities and the increasingly tight presidential race would make sense with that rise in policy uncertainty.

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