Business Optimism Slightly Rises,But Economic Concerns Deepen,Principal Index Shows
DES MOINES,Iowa – Principal Financial Group’s latest business sentiment index edged upward in August,even as concerns about the economic outlook intensified,according to a report released today. The index, based on a survey of 1,000 U.S. business owners and leaders, indicates a fragile balance as companies navigate ongoing economic uncertainty.
The index increase follows improved optimism regarding both the national and local economies. Though, nearly half of businesses surveyed (46%) expressed caution or pessimism about the year ahead, a significant increase from 29% in July 2024.
Expectations for individual business growth rose slightly to 58% in August,compared to 56% in April. Policy unpredictability remains a primary factor influencing growth outlooks for many decision-makers.
The report also highlighted the growing impact of tariffs, with 58% of U.S. businesses reporting negative effects on their operations. The retail (70%) and manufacturing (69%) sectors reported particularly significant impacts. Sixty-eight percent of businesses have already raised consumer prices (33%) or plan to do so within the next year (35%) in response to tariffs.
Small and mid-sized businesses are absorbing a greater share of these increased costs compared to larger businesses. The gap between small and large businesses passing costs onto consumers widened from 9 percentage points in April to 12 points in August.
“We’ve seen businesses continue to adapt since the April tariff announcements,” said Amy Friedrich, president, benefits and protection at Principal, in a press release.”But today, business owners are striking a fragile balance - they’ve absorbed what they can and are now feeling the full weight of new tariffs. An unpredictable economic landscape continues to impede their planning, and the path to sustained growth still feels uncertain.”
Despite the headwinds, most businesses remain committed to their workforce. Nearly half (48%) would only consider staff reductions as a last resort, and 70% would not, or only as a last resort, reduce or eliminate employee benefits. over the past three months,50% of businesses increased staffing,while 13% reduced it,remaining consistent with the prior quarter.
“The labor market has shown resilience, despite rising cost pressures,” Friedrich added. “Business owners are adapting to tougher conditions and treating layoffs as a last resort. Their priority is keeping teams intact so they’re ready to capture growth opportunities when uncertainty lifts.”
