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IBC forecast on par with historical average

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Iowa companies plan to build, spend and hire – eventually, at least – despite unfavorable business conditions, putting the Iowa Business Council third quarter survey results on par with historical averages.

The IBC today released its third quarter 2025 Economic Outlook Survey, which measures IBC member expectations for sales, capital spending and employment for the next six months. If the index measures above 50, sentiment is positive.

The survey’s overall economic outlook index for the third quarter is 60.0, an increase of 2.59 points from the second quarter and about even with the historical average of 60.36.

The third quarter survey subindices shifted from the second quarter survey:

  • Sales expectations declined 6.39 points to a value of 57.5.
  • Capital spending expectations increased 8.33 points to a value of 62.5.
  • Employment expectations increased 5.83 points to a value of 60.0.

Most IBC members indicated “no change” from the previous quarter in all three categories, indicating that economic uncertainty is something business leaders continue to combat.

Last quarter, sales expectations were higher, at 63.89.

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Joe Murphy

“Sales expectations are reflective of just the continued uncertainty that we’re seeing across all markets,” IBC President Joe Murphy said. “It was higher last quarter, obviously, but still, all three categories are above that 50-point threshold. There’s a big variance between all three of them from the previous quarter, but the fact that all three are still in that positive territory speaks to the continued resiliency of the Iowa economy. That’s obviously a very good thing.”

Willingness of IBC members to invest in capital spending is an indication that those companies are dedicated to conducting business in the state, he said.

“There has been, from a macro level, a lot of hesitation to deploy that capital over the last couple of years in particular,” Murphy said.

He added that now that there is movement or anticipated movement on Federal Reserve rates and, potentially, trade deals, there will hopefully be a time soon when long-term investments are not only planned but executed.

While some of these numbers could be considered positive, neutral or better than expected, Murphy said Iowa companies continue to deal with many business challenges.

“Our members are always looking to invest their next dollar in the state, whether that’s through employment, whether that’s through capital expenditures, whether that’s through some other means, these companies are committed to Iowa and Iowa’s economy. To have that [capital expenditure expectations] be a leading indicator, and the highest valued subindex is a very good thing for us,” he said.

“That said, I don’t want to sugarcoat it. There’s a tremendous amount of uncertainty out there. When you look at the indexes and the percentage breakdown, the majority of our members who answered those questions are anticipating no change to their deployment of capital, or to their expectations on sales or expectations on employment. That indicates a high level of uncertainty still, but the way that the numbers work out within the formula, it’s still a positive measurement.”

Uncertainty about tariffs, trade deals and Federal Reserve interest rates are among the biggest concerns of CEOs at some of Iowa’s largest businesses. As decisions were made and confirmed in September regarding rate cuts, with confidence that more are coming, businesses are becoming more optimistic, he said.

Iowa business leaders are watching “the general effect that those things have on the economy, in particular in Iowa and its impact on the ag economy,” Murphy said. “With trade deals and the tariff situation, China and soybeans, and the impact that that has had in the ag market, as we’re in harvest season right now. Then that impact on the other core economic areas of our state, whether that be advanced manufacturing, biosciences or financial services.”

Businesses not directly impacted by tariffs are watching the situation closely, he said.

“They’re still actively monitoring, closely monitoring the situation, because it has such a huge impact on the overall economy, and that impacts everybody,” Murphy said. “You might not be directly impacted, but everybody is watching it, because it’s going to impact something downstream for them in some capacity.”

Of the survey’s participants, 65% cited an unfavorable business climate when it comes to issues such as the national supply chain, infrastructure and federal regulations. Additionally, workforce attraction and retention and inflation were both cited by 45% of IBC members as top challenges.

“Supply chains are better than they were during COVID, but trade has an impact on supply chains,” Murphy said. “The ability for companies to manufacture certain parts that are inputted into the final product in your supply chain, those are being strained once again in some markets.”

On a federal level, budget reconciliation, extending tax rates, bonus depreciation and research and development credits were helpful to businesses, Murphy said. IBC will be talking to state and federal lawmakers about how to improve business conditions.

“We have done a lot over the last several years to enhance Iowa’s competitiveness at the state level, and we should continue to take advantage of opportunities to make Iowa’s business climate even more competitive into the future,” he said. “This is something that constantly has to be worked on. We never check the box and are done because other states change their laws. We’re always competing with other states for projects, for employers, and for employees. … We need to continue to make sure that we’re being bold and innovative with our policymaking to ensure a pro-growth business strategy for the state.”

In a news release, Gage Kent, CEO of Kent Worldwide and chairman of the Iowa Business Council, said, “Increasing expectations for capital spending is a positive signal for Iowa’s economy despite widespread uncertainty. We encourage policymakers at the state and federal level to continue pursuing legislation that expands business opportunity across all sectors in Iowa.”

The Economic Outlook Survey has been completed by IBC members on a quarterly basis since 2004. The Iowa Business Council is a nonpartisan, nonprofit organization whose members are the leaders of the state’s largest employers and span all 99 counties. To review previous surveys, click here.

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Gigi Wood

Gigi Wood is a senior staff writer at Business Record. She covers economic development, government policy and law, agriculture, energy, and manufacturing.

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