Annually we publish our midyear report with data from the US Chamber of Commerce, RSM, the Harris Poll, and other sources. The purpose of this report is to provide data for you to benchmark your company actions with your peers. We begin by quoting the RSM Middel Market Business Index at Q2, 124.5 having fallen from previously at 143.2. While the index is still positive, it indicates growing concern for inflation and tariffs.
As a result of this trend, there is additional data on middle market CEO opinions from The Harris Poll based on 412 responses from April 7 to April 29, 2025. Some results are:
- 20% of executives reduced their capital spending in Q2.
- 24% experienced lower revenues and 26% had lower earnings.
- Less than 50% will expand capital investment.
- These indicators are leading to substantial declines in new investment that is slowing bank lending demand.
The confusion caused by “on again-off again tariff policy” has caused the planned capital expenditures to decline to 43% from 69% in Q1 of this year. This has led to planned hiring dropping from 57% to 44%. Overall opinion on the economy was 35% of the respondents thought the economy was improving while 44% believe it is not.
A key statistic to remember is that 45% of all goods imported into the US are intermediate goods used in the production of final goods. The tariff environment shows price increases for goods in Q2 with 77% of respondents reporting increasing prices. Most middle market firms cannot absorb these cost increases, resulting in 57% having increased prices and 63% planning more price increases.
Middle market business owners have been conservative in their reactions to tariffs with only 43% increasing inventories and only 42% indicating inventory increases in the future. This sentiment also led to only 28% planning to expand bank borrowing, down from 40% in Q1.
While these trends indicate economic growth will slow in 2025, middle market businesses are not expecting a recession. Companies dependent on metal for fabrication are overly cautious while petroleum dependent operations have seen an 11% decline in the cost of fuel in the last year.
We subscribe to ITR Economics and rely on their estimates to advise our clients. ITR indicates slowing economic growth in 2025 with some recovery in 2026. Most of our clients are doing well but are conservative in their actions. We are experiencing double-digit growth too, yet we are concerned in tune with our clients.
We are all OK and dealing with considerable uncertainty. When was the last time you were operating with great certainty? Keep your eye on the horizon and plan for turbulent weather.
C Squared Solutions provides interim or fractional CFOs, COOs, and CEO advisors in nearly all industries. We analyze and advise on these issues frequently through sophisticated modeling and experienced management. Give us a call or visit our website for more information and details. We have been there and done that!
