Business sentiment continues lower as upper-income investment concern grows

The ripple effects of Trump’s tariffs and the growing uncertainty about the US economy continue to impact businesses and not just importers or those with public listings.

Business sentiment remains under negative pressure as highlighted in the latest reading of The Conference Board Leading Economic Index (released April 20) which stands at 100.5 following a decline of 0.7% in March, which accelerated from the 0.2% decline in February.

The decline for the six month period September-March of 1.2% is almost half that of the previous six months (2.3%), but the overall picture is for slowing economic activity ahead.

"March's decline was concentrated among three components that weakened amid soaring economic uncertainty ahead of pending tariff announcements: 1) consumer expectations dropped further, 2) stock prices recorded their largest monthly decline since September 2022, and 3) new orders in manufacturing softened,” explained Justyna Zabinska-La Monica, senior manager, Business Cycle Indicators, at The Conference Board.

The data does not suggest the US is in recession already or close to being in one, but it does indicated weakened activity.

“The Conference Board downwardly revised our US GDP growth forecast for 2025 to 1.6%, which is somewhat below the economy's potential,” added Zabinska-La Monica. “The slower projected growth rate reflects the impact of deepening trade wars, which may result in higher inflation, supply chain disruptions, less investing and spending, and a weaker labor market."

Another signal that businesses may face growing challenges is the Bain & Company/Dynata Consumer Health Indexes which reveals that upper-income Americans’ outlook declined by almost 12 points - the sharpest drop since the start of the Covid pandemic - to the lowest level since the pandemic (88.6) and reflecting the stock market rout.

“Our outlook index is in historic decline, led by upper-income earners,” said Brian Stobie, senior director in Bain & Company’s Macro Trends Group. “Not surprisingly, upper-income consumers are extremely concerned about their investment portfolios. Since the performance of these assets forms the basis of perceived financial health for this group, we would expect spending to decline if this outlook level persists.”

Although the spending intentions of this cohort remained high, this suggested front-loading of spending ahead of tariff impact.