U.S. business leaders are growing more cautious as inflation concerns, global instability and price volatility across energy and financial markets continue to pressure the economy, according to the latest Principal Financial Well-Being Index. 

The index, a quarterly measure of business sentiment and financial health, fell to 6.06 out of 10 in March, down nearly 6% from January’s reading and reversing a modest rebound seen during the second half of 2025.

“Employers across all business sizes are now confronting a more uncertain environment after entering the year with confidence in their ability to navigate policy changes and economic volatility,” Amy Friedrich, president of benefits and protection at Principal, said in a prepared statement. “Small businesses are paying close attention to forces beyond their immediate control, changing how they plan. Even local decisions are now informed by global dynamics, pushing employers to focus on efficiency and near-term resilience.”

Macroeconomic concerns increased across several categories in March. Concerns about inflation rose by seven points from January, while concerns about the stability of the global financial system increased six points and worries about a recession climbed eight points.

Nearly half of employers (48%) also reported concern around energy and fuel price volatility.

Confidence in the broader U.S. economy also weakened. Only 17% of employers said they believe the U.S. economy is growing, an eight-point decline from January and one of the lowest readings in the history of the index.

Small and mid-size businesses, which have historically reported lower levels of macroeconomic concern than larger firms, are also reporting growing unease tied to interest rates, supply chain pressures and the rising cost of materials and business supplies.

While optimism softened in March, many businesses continue to report stable operations and workforce levels.

According to the report, 54% of business leaders said their company’s financials improved compared with a year ago, though that figure declined six points from January. Meanwhile, 51% of employers said their business is growing, down from 56% at the start of the year.

Staffing levels remained relatively steady. Nearly half of employers (48%) reported increasing headcount while 42% maintained staffing levels. Only 13% said they reduced their workforce.

The report also found small and mid-size businesses remain more optimistic about their future financial performance than larger employers. They were six times more likely than large businesses to say they expect their financial performance to improve over the next 12 months.

“In 2025, businesses anchored their confidence in the strength of their own operations, even amid market volatility,” Friedrich said. “That confidence has been tested this year by higher fuel costs, persistent inflation, and growing recession concerns. Still, many small and mid-size businesses continue to look ahead with cautious optimism — focused on protecting what’s in front of them today while preparing for opportunities that lie ahead.”