U.S. business confidence remains near historic lows despite a modest rebound from a post-pandemic trough, according to the latest Principal Financial Well-Being Index. The Index climbed to 6.80 out of 10 in August, up from 6.02 in April, but remained far below last year’s 8.08, reflecting persistent uncertainty linked to policy shifts and new tariffs.
While optimism about the national and local economies has improved, expectations for individual business growth have remained steady, with 58% of businesses projecting growth in August, compared with 56% in April. Half of companies (46%) now describe themselves as cautious or pessimistic about the year ahead, up sharply from 29% in July 2024. Unpredictable government policies remain a key factor shaping outlooks.
Tariff pressures are increasingly weighing on operations. More than half of U.S. businesses (58%) report that higher tariffs are negatively affecting their operations, with retail (70%) and manufacturing (69%) sectors hit hardest. Sixty-eight percent have either raised prices (33%) or plan to do so within the next year (35%). Small and midsized businesses are absorbing a larger share of these costs than larger firms, with the gap in passing costs to consumers widening from nine percentage points in April to 12 points in August.
“We’ve seen businesses continue to adapt since the April tariff announcements,” said Amy Friedrich, president of Benefits and Protection at Principal. “Business owners are striking a fragile balance — they’ve absorbed what they can and are now feeling the full weight of new tariffs.”
Despite economic pressures, the labor market has remained resilient. Half of businesses say layoffs are a last resort, and 70% would never, or only reluctantly, cut employee benefits. In the past three months, 50% of firms have added staff while only 13% have reduced it.
“The priority for business owners is keeping teams intact, so they are ready to capture growth opportunities when uncertainty lifts,” Friedrich added.
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