The RSM US Middle Market Business Index (MMBI), presented by RSM US LLP (“RSM”) in partnership with the U.S. Chamber of Commerce, declined steeply to 124.5 in the second quarter from 143.2 in the prior period on a seasonally adjusted basis. This 18.7-point drop represents the second largest quarter-over-quarter decline in the 10-year history of the survey, with the results reflecting increasing concerns about the cost of doing business amidst growing uncertainty around the imposition of broad-based tariffs.

The sharp drop in the topline index is underscored by declines across a range of categories, with 20% of middle market executives reporting lower capital expenditures, 24% reporting reduced gross revenues and 26% reporting lower net earnings.

“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.“Sub-indices on gross revenues, net earnings and capital expenditures are all around 110 and the reading on the general economy is lower, indicating it is likely that middle market firms will barely avoid a recession through midyear.”

Middle Market Sentiment Sours as Firms Slow CapEx and Hiring Plans

The survey results suggest a pullback in overall economic activity until a new pricing framework is established for imported goods, with less than half of the respondents reporting an improvement in the economy, gross revenues and net earnings. Forty-four percent of executives said the economy worsened somewhat or substantially in the current quarter while 35% said it had improved.

A notable decline in planned capital expenditures further illustrates the change in executives’ outlook on the economy, with only 43% reporting increased or plans to increase outlays in the second quarter, down from 69% in the first quarter. Similarly, only 44% said they had increased hiring—a decline from 50% in the first quarter, and the proportion of executives who said they supported recruitment with higher compensation also declined from 57% to 45% in the current period.

“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. “The U.S. Chamber continues to urge the administration to prioritize tariff relief for businesses and applauds efforts to negotiate as many new trade agreements as possible that expand market access for U.S. companies and benefit American workers.”

Pricing, Borrowing and Inventory Strategies Shift as Firms Contend with Tariffs and Inflation

With the effective tariff rate currently at 17.8%, more than seven times higher than before the tariffs, it is unsurprising that 77% of respondents indicated they experienced an increase in prices paid for inputs. RSM expects this inflation-tracking index to remain elevated, potentially reaching all-time highs since the survey began in 2015.

Small and medium-sized enterprises lack the financial depth to absorb the increase in costs, and consequently, 57% of surveyed executives said they raised prices in the current quarter and 63% indicated they intend to over the next six months. Additionally, the number of executives who reported an increase in borrowing fell to 28% from 40% in the previous quarter.

Inventories will be another key focus area as the large firms with capital depth pulled forward new orders to avoid increased trade taxes. About 43% of survey participants increased inventories during the current period and only 42% indicated they will do so over the next six months, reflecting the general uncertainty about the cost of doing business going forward.  

The survey data that informs this index reading was gathered from 412 respondents at middle market firms in the United States from April 7 to April 29, 2025.