U.S. business economists see a slightly lower risk of recession in the year ahead, but companies remain hesitant to hire or invest due to mounting cost pressures and lingering policy uncertainty, according to the July 2025 Business Conditions Survey released Monday by the National Association for Business Economics (NABE).
“The July survey panelists assess a slightly lower probability of the U.S. entering a recession over the next 12 months than they did in May,” said Emily Kolinski Morris, NABE president and global chief economist at Ford Motor Company. “However, companies are taking a more cautious approach to hiring and capital expenditures amid elevated materials costs and wages.”
The findings show a muted business outlook. Just 2% to 3% of respondents expect their companies to accelerate hiring or U.S. investment over the next six months, while one in four anticipate delays in either area.
Cost pressures remain a key concern. Fifty-six percent of panelists report rising materials costs—up from 52% in May, pushing the Net Rising Index (NRI) for observed costs to 54, the highest since July 2022. Expectations for future cost increases, however, eased slightly, with the expected cost NRI falling to 49 from 54.
Uncertainty around federal policy is also weighing heavily on business sentiment. While concern over a potential U.S. recession dropped significantly—from 84% in May to 59%—an equal share of respondents now cite “uncertainty over the implementation and timing of policy proposals from the new administration” as one of the top three downside risks to their company outlooks.
“The recession probabilities have shifted slightly lower,” said Selma Hepp, chair of the NABE survey and chief economist at Cotality. “But an elevated and consistent share of panelists remains concerned about uncertainty over policy from the new administration. Their uncertainty may be holding businesses in a neutral state.”
Trade policy is another source of caution. Two-thirds (67%) of respondents expect the average effective tariff rate to remain unchanged or rise slightly by the end of the year. At the time of the survey, the Yale Budget Lab estimated the effective rate at 15.8%, with most panelists expecting it to stay in the 15% to 25% range.
The NABE survey, conducted in mid-July, reflects the views of corporate economists and business leaders across a wide range of industries.
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