The RSM US Middle Market Business Index (MMBI), presented by RSM US LLP in partnership with the U.S. Chamber of Commerce, experienced a significant drop in the second quarter, falling to 124.5 from 143.2 on a seasonally adjusted basis. This 18.7-point decrease marks the second-largest quarterly decline in the survey's 10-year history, as businesses grapple with rising costs and uncertainty surrounding trade tariffs.

Why it matters: This sharp downturn in sentiment among middle market firms, which are crucial to the U.S. economy, signals a potential economic pullback. Executives are responding by slowing down capital expenditures and hiring plans, raising concerns about near-term growth prospects.

The big picture: The survey results reflect growing anxieties about the impact of ongoing trade disputes on the cost of doing business. Less than half of the executives surveyed reported improvements in the economy, gross revenues or net earnings, with 44% stating the economy had worsened. This sentiment aligns with calls from organizations like the U.S. Chamber of Commerce for tariff relief to mitigate harm to businesses.

By the numbers:

  • MMBI: Dropped by 18.7 points to 124.5 in Q2 2025.
  • Capital Expenditures: 20% of executives reported lower CapEx; only 43% plan increases, down from 69% in Q1.
  • Hiring: 44% reported increased hiring, down from 50% in Q1.
  • Revenues & Earnings: 24% reported reduced gross revenues, and 26% reported lower net earnings.
  • Input Costs: 77% of respondents experienced an increase in prices paid for inputs.
  • Price Increases: 57% of firms raised prices in Q2; 63% intend to do so in the next six months.
What they're saying: "While the topline reading is well above 110 – which is the dividing line between economic expansion and economic contraction – internal components of the survey point to potentially large declines in new orders and an aversion to risk that have not been observed in the survey since the pandemic in 2020,” said Joe Brusuelas, chief economist with RSM US LLP. He added that sub-indices suggest middle market firms might "barely avoid a recession through midyear.”

“The data reiterates what we have heard in recent weeks from a historic number of small and medium-sized businesses: higher costs and interrupted supply chains will cause irreparable harm,” said Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce.

Zoom in: The survey indicates a significant shift in business operations and outlook.

  • Only 43% of executives reported plans to increase capital outlays in Q2, a steep drop from 69% in Q1.
  • Hiring plans have also cooled, with 44% increasing staff compared to 50% previously. Support for recruitment through higher compensation also fell from 57% to 45%.
  • Faced with an effective tariff rate now at 17.8% (more than seven times higher than pre-tariff levels), businesses are adjusting pricing and inventory strategies.
  • The number of executives reporting an increase in borrowing fell to 28% from 40% in the previous quarter, suggesting tighter financial conditions or reduced appetite for debt.
  • Inventory levels saw 43% of firms increasing stock in Q2, but only 42% plan to do so in the next six months, reflecting uncertainty.
What to watch: The coming months will be critical in observing whether these trends solidify into a broader economic slowdown for the middle market. Continued inflationary pressures from tariffs and supply chain issues could further dampen investment and hiring. Policy decisions regarding trade and tariffs will likely play a significant role in shaping business sentiment and activity. The survey data was gathered from 412 respondents at middle market firms in the United States from April 7 to April 29, 2025.

SOURCE: RSM US LLP

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