Business Outlook Survey Q2 2025

Survey respondents more pessimistic about U.S. economy; inflation still a concern

Quarterly Market Report Q2 2025

Last quarter

Looking back at the previous quarter, survey respondents had a negative view of U.S. economic performance. However, they were split on the question of business activity for their own business with almost equal numbers reporting increasing, decreasing, or no change.

Slightly more respondents reported an increase than a decrease in employees with little change in part-time employees and a slight increase in hours worked. About half of the respondents said that they have had to increase wages and benefits for their employees. More than half increased the price of the goods or services they sell. About a third of respondents saw increasing capital expenditures, similar to the results we reported for the first quarter.

Because the survey respondents change from one quarter to the next, any analysis of the results over time must be interpreted with caution. This survey is a snapshot of this particular sample of businesses at this time. However, the results looking back at the second quarter were somewhat more negative than last quarter's expectations.

Looking ahead

Respondents were also more negative about the next six months, both in terms of their assessment of the U.S. economy and their own business. The diffusion index was negative for all the questions related to economic activity, employees, and hours worked. Inflation indicators remain high, though slightly less pressure on wages are expected. Concerning capital expenditures, there is more of an even split between those expecting an increase and those expecting a decrease.

Special focus

This quarter's special focus question was on the effect of inflation. Specifically, we asked business leaders what areas of their business have been most impacted by inflation (check all that apply). More than half of respondents mentioned raw materials and/or labor/wages.

We also asked how much of an impact inflation has had on their business in the last 12 months. Nearly all respondents answered "slightly" or "significantly" (evenly split between those two choices) with only one answering "not at all."

When asked if they expect inflation to have a larger or smaller effect on their business operations in the next 12 months, 67% answered "larger." Only 15% answered "smaller," and 18% answered "the same effect as the last 12 months."

About the survey

Beginning with the 2023 Q3 Quarterly Market Report, the Chamber has conducted a survey of local businesses to gauge the state of the Quad Cities economy. This survey is similar to surveys conducted by groups around the country, in that it asks some basic questions about the respondent’s assessment of economic activity, wages, hiring, capital expenditures and a few other indicators. The options for each question are “increasing,” “decreasing” or “no change.” A “diffusion index” is calculated for each question, which is simply the difference in percentage points between “increasing” and “decreasing.” This diffusion index captures the degree to which respondents as a group feel that a certain aspect of the business climate is changing in one direction or the other.

The responses this quarter are a representative mix of companies from the region with 16% manufacturing, 18% retail, 47% service providers and 20% other. (In some lines of the tables, percentages may not total 100 due to rounding.)

This survey is a regular feature of the Quarterly Market Report, and we invite our members and other local businesses to watch for the survey invitation next quarter.

As the difference in responses between manufacturing and non-manufacturing companies was not significant, only the overall results were reported this quarter.