#United States #Umpqua Bank #Economic Outlook #Tacoma #Business Barometer

Umpqua Bank's Business Barometer 2025

Umpqua Bank has published its seventh annual Business Barometer, and the findings reveal a wave of optimism among U.S. businesses. In the face of economic uncertainties like tariffs and inflation, nearly half of the surveyed businesses anticipate a favorable shift in economic conditions over the next twelve months. This optimism is particularly pronounced among middle market companies, where 60% foresee improvements, and even among small businesses, 44% express similar sentiments. These figures represent a four-year high for both categories, making the survey a crucial indicator of current business sentiment.

Key Insights from the Survey

The survey, which included nearly 1,300 participants from small businesses ($500K-$10M) and middle market companies ($10M-$500M), shows effectively how these entities are preparing for the future. Here are some key highlights:

• - Economic Improvement: Almost 50% of respondents expect economic conditions to enhance in the coming year. In particular, confidence in the middle market is strong, with 62% expecting better conditions compared to 32% in the small business sector.
• - Concerns and Preparations: Inflation (60%), recession (42%), and tariffs (41%) have been highlighted as the top concerns. In response, nearly half of the participants plan to stockpile inventory or absorb cost increases over the next year. This level of preparation reflects a calculated approach to tackling uncertainty that has become a hallmark of recent years.
• - Investment Trends: Approximately 85% of middle market businesses and 50% of small businesses intend to invest in or adopt generative AI tools, indicating a forward-thinking approach and a belief in the tech's potential to aid growth. AI has emerged as a leading priority for many businesses, underlining a clear shift towards innovation.
• - Cybersecurity Awareness: In a landscape increasingly fraught with digital threats, 3 in 10 businesses report feeling adequately prepared against potential attacks. Strategies including employee training and implementing fraud prevention solutions have become commonplace to ensure business continuity and security.

Small Business Dynamics

The results show a notable shift in attitudes among small businesses. Where previously there may have been a focus on cost-cutting, this year reflects a pivot towards growth opportunities.

• - While 55% are still inclined to manage costs, a significant change has emerged where 28% are focusing on growth initiatives, up from 18% in 2024. Key indicators such as financing expansion, investing in digitization, and merging with or acquiring other businesses received improved ratings compared to previous years.

Middle Market Confidence

Although slightly lower than last year’s peak, middle market companies continue to express considerable confidence. Approximately 65% anticipate increased customer demand, signaling a robust market ahead. Additionally, nearly 70% favor investment over cost-cutting measures, reflecting a strategic optimism.

However, they also maintain a cautious approach, with a high emphasis on conserving cash while still aiming for lucrative opportunities. The delicate balance between growth aspirations and fiscal management appears to be a critical theme within this year’s barometer findings.

Tariff Implications and Strategic Responses

The impact of tariffs remains a concern with 41% of businesses listing it among their top three worries. Despite this, many organizations have not taken drastic measures; instead, they have opted for thoughtful adaptations.

• - Many respondents have plans to manage pricing fluctuations and strengthen supplier relationships, which may alleviate some of the negative impacts associated with tariffs. Additionally, a focus on maintaining or increasing levels of foreign trade suggests that, despite challenges, businesses are actively seeking stability in their operations.

Conclusion

The Umpqua Bank 2025 Business Barometer underscores a resilient and cautiously optimistic business landscape. Despite ongoing economic uncertainties, the majority of businesses are positioning themselves for growth through strategic investments, innovative technology adoption, and comprehensive risk management strategies. It’s apparent that small and middle market enterprises will continue to play a pivotal role in the U.S. economy's landscape, fueling a dynamic drive towards sustainability and growth amidst fluctuating external conditions.