The data, which has been seasonally adjusted, is based on responses from 402 senior executives at middle market firms in a survey conducted by The Harris Poll from Jan. 6 to Jan. 27.
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The data, which has been seasonally adjusted, is based on responses from 402 senior executives at middle market firms in a survey conducted by The Harris Poll from Jan. 6 to Jan. 27.
The Q1 2025 MMBI jumped to 144.1, an all-time high for the index.
Senior middle market executives’ optimism came through in their outlook for increased net earnings, gross revenues and capital expenditures.
The survey was taken before a series of tariff announcements by the new administration raised the level of uncertainty faced by businesses.
The Middle Market Business Index is created in partnership with the U.S. Chamber of Commerce.
That jump was considerably larger than the 7.8-point increase that occurred in 2017, after Trump was first elected. However, it is not uncommon to see elevated optimism recede following the initial response after an election.
The survey was taken before a series of tariff announcements by the new administration raised the level of uncertainty faced by businesses. Because of this uncertainty, it is probable that the survey for the second quarter will reset lower as firms adjust their inventory levels in addition to managing their bottom lines amid rising prices for imported goods.
It is important to remember that somewhere between 40% and 45% of all imports are intermediate goods, or inputs that feed into domestic manufacturing. Those firms that rely on these goods are likely for now to absorb a portion of those costs, which will compress their margins.
Across the survey, executives’ optimism on net earnings, revenues, capital expenditures, hiring and compensation are all likely to pull back in the next quarter as firms better understand the impact of higher trade taxes, including the large reciprocal tariffs that may be imposed on April 2.
In addition, changes in the tax code and regulations are likely to evolve more slowly than anticipated, with tax legislation expected in the second half of the year, and regulatory reform evolving over the next 18 months.
The index compiled the responses of 402 senior executives at middle market firms who were asked for their outlook on the economy and business conditions. The survey was conducted from Jan. 6 to Jan. 27.
The executives’ optimism came through in their outlook for increased net earnings, gross revenues and capital expenditures over the next six months—suggesting that these respondents intended to hit the economic accelerator prior to the onset of the current bout of policy uncertainty linked to trade.
The prospect of tax and regulatory relief has raised middle market expectations for economic growth and hiring. The improvement in the middle market is encouraging but could be short-lived if the growing policy uncertainty coming from Washington slows the economy in the coming months.
Survey participants think that the economy will improve amid reduced taxes and a lighter regulatory touch.
Nearly three-quarters, or 74%, expect the economy to improve through midyear, with 51% noting it improved in the first quarter.
For gross revenues and net earnings, which are critical to support capital expenditures and hiring, 79% and 75% of respondents, respectively, stated they expect improvement over the next six months.
Those views contrast with the 54% who noted an improvement in each category during the first quarter.
Capital expenditures among middle market firms are on the upswing, with 54% of executives saying they increased outlays on productivity-enhancing investment in the first quarter and 69% saying they intend to do so this year.
Supporting their expectations for a virtuous business expansion, 42% said borrowing conditions had improved and 43% expect them to do so in the near term. Those responses are consistent with the improvement in lending conditions over the past several months.
Half of the respondents indicated they increased hiring in the first quarter, and 67% said they would do so in the near term.
Given that the economy is at full employment with a 4% unemployment rate, this intention requires close monitoring; a move below that rate would almost certainly involve higher wages and pricing pressures for firms.
That wage pressure was clearly an issue for executives, as 58% noted that they had increased compensation to attract labor and 74% said that they would do so this year.
If there was one area of concern, it was that 66% of respondents noted an increase in prices paid and 75% stated they expect prices to continue rising in the next six months.
More than half, or 56%, of respondents said that they had passed along those costs through prices received for their products, and 68% expected to be able to do so in the near term.
Given the stubborn and sticky inflation in the economy, the nexus of full employment, an acceleration in hiring and the ability to pass along price increases to customers downstream could lead to higher inflation.
Any sustained reacceleration in inflation would result in higher interest rates out of the Federal Reserve, which would dampen the optimistic forward look in this report.
Middle market firms are clearly optimistic about what they expect will be a friendlier tax and regulatory environment.
Elevated expectations around revenues and earnings suggest an acceleration in hiring, higher compensation and increased outlays on equipment, software and intellectual property that would support improved productivity and overall profitability.
If inflation and inflation expectations remain in check, this bodes well for small and medium-sized firms this year and next.
To refer to the percentages in the subindex items, access the PDF.
Keeping existing customers engaged and satisfied.
Streamlining operations to reduce costs while maintaining quality.
Persistent difficulties with unstable global supply chains that result in delays and higher costs.
Hiring and maintaining employees that are proficient in AI.
Maintaining margins as rising shipping and material costs eat into profits.
Maintaining high standards of education while balancing limited funds.
In partnership with the U.S. Chamber of Commerce, we've collected data on middle market firms since 2015 through quarterly surveys conducted by The Harris Poll.
The RSM US Middle Market Business Index provides a leading measure on the performance of businesses that make up the heart and soul of our country's economy.
Middle market organizations, which make up the real economy, are too big to be small and too small to be big. They are the backbone of the broader economy, yet they often fly under the public radar. They have distinct challenges and opportunities around financing, material resources, labor, technology, innovation, regulation and other issues. The MMBI breaks new ground by capturing the distinct sentiment of this important subset of the U.S. economy.
RSM US LLP and The Harris Poll have collected data on middle market firms from a quarterly survey that began in the first quarter of 2015. The survey is conducted four times a year in the first month of each quarter: January, April, July and October. The Middle Market Leadership Council, our survey panel, consists of approximately 1,600 middle market executives, and is designed to accurately reflect conditions in the middle market. The data is weighted to ensure that it corresponds to U.S. Census Bureau data on the basis of industry representation.
An index reading above 100 indicates that the middle market is generally expanding; a reading below 100 shows that the middle market is generally contracting. The distance from 100 is indicative of the strength of the expansion or contraction.
The MMBI survey is conducted four times a year. It is based on a subset of questions that ask middle market executives to report the change in a variety of indicators ranging from their organizations’ earnings to hiring levels and prices paid for goods and services.
The MMBI is a composite index computed as an equal weighted sum of the diffusion indexes for 10 survey questions plus 100 to keep results from becoming negative. The index is designed to capture views on both current and future conditions; it includes five questions on middle market executives' recent experiences and five on their expectations for the future.
The survey panel, the MMBI Leadership Council, consists of approximately 1,600 middle market executives across a broad array of industries, and is designed to accurately reflect conditions in the middle market.
RSM US LLP and The Harris Poll have collected data on middle market organizations using quarterly surveys that began in the first quarter of 2015. The MMBI survey is typically conducted four times a year, in the first month of each calendar quarter: January, April, July and October.
With a backlog of research for nearly 10 years, each question in the MMBI index is now seasonally adjusted using the Census X-13 method in order to remove periodic fluctuations associated with recurring calendar-related events. Seasonally adjusted values for questions make it easier to observe underlying fundamental changes, particularly those associated with economic expansions and contractions.
For this adjustment, the "increase" and "decrease" percentage components of each index question will be tested for seasonality separately and adjusted accordingly if such patterns exist. If no seasonality is detected, the component will be left unadjusted.
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