Small business confidence leaps into the new year [WSJ/Vistage Dec 2024]

The upward trend in small business confidence continues. The WSJ/Vistage Small Business CEO Confidence Index rose for the fourth consecutive month, reaching 111.9 in December. Outside of the surge fueled by government stimulus in the summer of 2021, this is the highest level of small business confidence since May 2018.

While optimism about the U.S. economy continues to rise, the positive impacts of a strong economy on small businesses are the main drivers of the increase in confidence from last month.

• Over 7 in 10 small businesses (71%) plan to increase their workforce in the next 12 months, up from 64% last month.
• This will support the increased revenues forecasted as 80% of small businesses expect increased revenues in the new year, an incremental gain from 79% last month, and the highest proportion since June 2021 when stimulus was fueling the economy.

Workforce expansion hits record levels among small businesses

Leading into the new year, it is typical to see workforce expansion plans spike as small businesses are looking ahead to new budgets and new roles. One of the biggest drivers of small business confidence is hiring plans for the year ahead: 71% of small businesses will expand their workforce, a 7-point jump from November and a 28-point increase since July 2024. This is also the highest proportion of small businesses planning to add personnel since December 2021. Looking back at historical survey data, outside the pandemic hiring boom, the last time this number reached that high was in December 2017.

Interest rate cuts to fuel spending in the new year

With the Federal Reserve cutting interest rates for the third consecutive month in December, these cumulative rate cuts will significantly affect a larger number of small businesses. Small businesses waiting for incremental cuts should make investments before inflation returns, which may likely bring interest rate hikes later this year. In a recent survey, when asked what level of interest rate cuts would impact small businesses survey, 57% of small businesses reported 1 point or less.

In the most recent ITR Economics Fed Watch, Consulting Principal and Chief Economist Brian Beaulieu indicated that the Fed is expected to lower interest rates two more times by 25 basis points each in the upcoming year. This would result in a total reduction of 1.5 percentage points since September.

Given these indicators, Beaulieu recommends that CEOs should “think strategically how you will play the next round of inflation.” Pay attention to the marketplace versus what the Fed is doing. “Make your move in the first half of the year 2025” — when the Federal funds rate reaches its lowest level — “and lock and load,” he says.

New year, new administration brings renewed confidence

A new Presidential administration and continued interest rate cuts are fueling the rise in small business CEO confidence. When asked about what was driving their economic optimism, a common theme was President-elect Donald Trump’s business-friendly tax policies, while trade and tariffs are the biggest concern. Following the inauguration at the end of the month, small business confidence will be impacted by when and how these proposed policies are implemented.

December highlights

The December WSJ/Vistage Small Business CEO Confidence Index was calculated from an online survey sent to CEOs and other key leaders who are active U.S. Vistage members. The survey collected data from 728 respondents with annual revenues of $1-20 million and was open between December 2 and 16, 2024, capturing year-end sentiment as small business CEOs look ahead to a new year and administration.

• Current economy: Since August, the proportion of small businesses that report an improved economy has risen from 12% to 37%, while those that feel economic conditions have worsened, falling from 48% to 20%.
• Future economy: The proportion of small businesses who are optimistic about the future of the U.S. economy declined marginally from last month to 59% while the percentage who expect the economy to worsen increased marginally to 13%.
• Revenue projections: 8 in 10 (80%) small businesses expect increased revenues over the year ahead, the highest proportion since May 2018 other than the stimulus-induced surge during the summer of 2021.
• Profitability projections: 67% of small businesses expect increased profits in the next 12 months, above last year’s 49% and well above the 2024 low of 44% recorded in August. Just 7% of small businesses expect profits to decline over the next year, compared to 18% one year ago.
• Fixed investment plans: 43% of small businesses plan to increase fixed investments over the next 12 months, while 7% plan to decrease fixed investments.
• Workforce expansion plans: Looking ahead to the new year, 71% of small businesses plan to add personnel over the next 12 months, a 7-point increase from last month and the highest proportion recorded in December since 2017, excluding the pandemic era.

To explore the full December 2024 WSJ/Vistage Small Business dataset, visit our data center or download the infographic.

Vistage’s January survey will take place January 6-13, 2025.

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