US Small Business Sentiment Improves, but Uncertainty Rising

• U.S. small-business confidence improved in May, likely because of a de-escalation in trade tensions between Washington and China, though uncertainty over the outlook mounted amid worries over the fate of President Donald Trump's tax-cut agenda.
• The National Federation of Independent Business said on Tuesday its Small Business Optimism Index increased three points to 98.8 last month, rising for the first time since December.
• The trade truce resulted in the Trump administration slashing tariffs on Chinese goods to 30% from 145.0% through early August. That probably led small business owners to anticipate higher sales, accounting for most of the increase in the index. But the survey's uncertainty index rose two points to 94.
• The share of small businesses expecting higher inflation-adjusted sales volumes jumped 11 points to 10.0%, accounting for most of the improvement in the Optimism Index. There was also a big rise in the proportion expecting better business conditions, though the share reporting taxes as their single most important problem increased.
• The share viewing current inventory as "too low" was the highest since August 2022. That, together with lengthening delivery times of inputs to factories, suggests shortages of some goods and price hikes could be looming.

(Source: Reuters)