August 11, 2026
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Small business optimism rose 2.4 points in July to 99.8 after having risen 2.1 points in June to 97.4 after declining 0.6 point in May. The index level is just a shade below its 40-year average rate of 98.0 which is regarded as the breakeven point for this series.
NFIB Chief Economist William Dunkelberg said, ““Small business optimism rose again in July, with a significant increase in owners expecting to hire, accompanied by an improvement in plans to make capital expenditures. Although uncertainty is currently elevated, Main Street anticipates that business conditions will continue to improve.”
We expect 3.5% GDP growth in the third quarter and 2.3% growth in 2026. The economy still seems to be growing at a respectable pace.
The core personal consumption expenditures deflator rose 3.0% in 2025. We expect it to increase 3.2 in 2026. This is the inflation measure that the Fed targets at 2.0%.
The funds rate currently is 3.6%. The Fed believes the so-called “neutral” funds rate is about 3.0%. However, incoming Fed Chair Warsh has stated emphatically that the Fed now intends to get the inflation rate back to the 2.0% mark. As a result, the markets have fully priced in one 0.25% rate hike between now and yearend which would like the funds rate to 3.75-4.0%. We agree.
Stephen Slifer
NumberNomics
Charleston, SC
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