Business sentiment index

The business sentiment index is estimated to reach 48.7 in 2025, representing a marginal increase of 0.3% from the previous year. This level remains below the neutral threshold of 50.0, indicating that overall business confidence continues to reflect mild contraction within the US business sector. The gradual improvement is supported by falling interest rates, which have provided some relief to businesses by reducing borrowing costs and enabling reinvestment in previously stalled projects. Despite this, uncertainty around tariff policy and international trade—particularly regarding US relationships with Canada and Mexico—continues to be a headwind. Deregulatory initiatives by the Trump administration aim to foster domestic investment and boost manufacturing, but the business sector remains cautious in anticipation of further policy developments.

Over the five years to 2025, business sentiment has experienced pronounced volatility, driven by several significant macroeconomic events. The index surged to 60.6 in 2021, driven by the rollout of COVID-19 vaccines and the lifting of lockdown mandates, which reignited economic activity and unleashed pent-up demand, particularly for services. However, this rebound was not sustained; in 2022, surging inflation prompted the Federal Reserve to aggressively raise interest rates, while the Russian invasion of Ukraine increased geopolitical tensions and uncertainty. The index dropped 11.6% to 53.5 in 2022 as a result. Small businesses were disproportionately affected by rising costs and rate hikes, while larger firms managed better but also faced declining sentiment. In 2023, persistent inflation and elevated interest rates continued to hamper confidence. Although consumer spending remained resilient, high operating costs weighed on business budgets and sentiment declined a further 12.1%, reaching 47.1.

Growth resumed in 2024, when the index rose by 2.5%, buoyed by early signs of declining interest rates that rekindled some business optimism. However, macroeconomic uncertainty persisted, characterized by an environment of fluctuating inflation rates, uncertain monetary policy, and ongoing trade negotiations. Supply chain pressures and global political tensions remained relevant, adding to business caution. Despite these headwinds, the resilience of consumer spending played a stabilizing role, preventing more significant declines in business sentiment.

During the five years to 2025, the business sentiment index declined by 1.5%. This period was marked by extreme swings from pandemic-driven rebound to new pressures arising from inflation, monetary tightening, and geopolitical shocks. Volatility became an enduring feature, as sentiment responded acutely to changing costs of capital, policy signals, and global uncertainties. Broader macro trends, including shifts in supply chain strategies, policy responses to sustainability and climate risk, and an evolving international trade landscape, all contributed to the uncertain outlook and weighed on business sentiment throughout the period.