Survey respondents more pessimistic about U.S. economy; tariffs having negative impact

When asked about their expectations for economic activity over the next six months, a larger percentage of respondents (18%) expect U.S. economic activity to increase compared with 8% who thought activity had increased over the previous quarter. There was even more optimism about the respondents' own businesses with 43% expecting increased activity.

Diffusion indexes were small but positive on the question of hiring, meaning slightly more respondents expected to hire in the next six months rather than decrease the number of employees. The diffusion index also suggests wage and price pressure could pick up in the next six months. More respondents expect to decrease capital expenditures in the next six months.

This quarter's special focus question was on tariffs. Specifically, we asked business leaders about the effect of tariffs on the U.S. economy and on their own business.

We asked a similar question in February in the Quarterly Market Report for 2024 Q4. At that time, the new administration had announced that there would be a tariff announcement soon, but the specifics were not yet known.

A clear majority assessed the effect of tariffs both on their own business and on the U.S. economy to be negative, as was expected in February. In fact, the percentages on each response to the question about their own business was similar to what we saw in February.

What differed compared to February was the assessment of the tariff impact on the U.S. economy, which was more negative than their assessment on their own business and more negative than expectations in February.

Finally, we asked if respondents altered any of their business decisions this year because of the impact of tariffs (Examples: changing the timing of orders to get ahead of tariffs, changing suppliers, etc.) About 1/3 of respondents (35%) answered "yes" to that question while 65% answered "no."

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 25% manufacturing, 14% retail, 50% service providers and 11% 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.