Sioux Falls CEOs report ‘clear softening’ in conditions, outlook

Sioux Falls CEOs aren’t feeling as positive about their businesses as in recent years — or investing as much in hiring.

That’s according to the most recent SiouxFalls.Business quarterly CEO survey, conducted in partnership with the Augustana Research Institute and the Sioux Falls Development Foundation.

The survey was conducted during mid-June and completed by more than 50 CEOs and business owners.

Seventy-three percent said overall conditions were good or excellent — exactly the same as one year ago and slightly better than three months ago — but 6 percent said conditions were poor — the worst since the early months of the pandemic in 2020.

Forty-six percent reported at least a slight increase in sales activity, while 37 percent reported a decrease of some sort.

“What stands out is a clear softening in conditions and sentiment,” said Raymond Leach, director of fintech at Augustana University.

“There are a number of economic factors at play right now. GDP growth is slowing, and we’re beginning to see signs of job losses. The impact of tariffs hasn’t fully reached consumers yet, but businesses may soon start passing along those higher costs, which could push prices up.”

The trade war with China “is also creating challenges, particularly for U.S. farmers who are struggling to move crops like soybeans,” Leach continued.

“On top of that, the Federal Reserve still has two meetings left this year to decide whether to hold interest rates steady or continue cutting them. All of these national dynamics will inevitably filter down and be felt by businesses here in Sioux Falls. It will be interesting to see how all of this plays out over the fourth quarter.”

Sioux Falls CEOs showed a mixed approach in pricing, with 46 percent reporting some kind of increase for their prices and services, while the rest held steady or decreased prices.

Nationally, core PCE inflation, which is calculated using the personal consumption expenditures price index, was 2.9 percent in August, which remains above the Federal Reserve’s 2 percent target.

“Elevated inflation is still a concern, but the Fed’s recent quarter-point rate cut suggests they’re more focused on slowing growth and weaker job gains,” Leach said.

“I don’t believe that cut alone will reignite an inflation spiral, but the balancing act is tricky. The Fed is navigating a slowing economy while inflation remains above target, all under significant political pressure to cut rates more aggressively. My main worry with interest rates is that caving to this political pressure could create a much worse inflation problem.”

Less than one-third of Sioux Falls CEOs reported a hiring increase in the third quarter, down from more than 81 percent in the second quarter, while one in four reported some kind of decrease.

The slowdown “mirrors national trends,” Leach said. “While new government jobs data is delayed due to the shutdown, private payroll data from ADP shows payroll declines in September and a downward revision for August, ultimately showing net job losses.”

The results also fall “very much in line with what our surveys and other business contacts are telling us — namely that there is a lot “no hire, no fire” going on right now,” said Ron Wirtz, regional outreach director for the Minneapolis Federal Reserve.

“That’s good for existing workers — there appears to be decent job security for many workers currently despite uncertainty — but bad for anyone looking for work, as well as those looking to change jobs.”

In Sioux Falls, “generally, I see the business climate improving slightly as interest rates and prices begin to stabilize,” said Bob Mundt, president and CEO of the Sioux Falls Development Foundation.

“Sales and hiring activity has slowed this quarter, but businesses plan to spend more capital this next quarter, so sales and hiring may rebound this next quarter.”

When asked about the next three months, 27 percent of Sioux Falls CEOs said they expect above-average business activity, versus 24 percent three months ago. One in four expects below-average activity, about the same as last quarter.

“Certain industries, including construction, retail and service industries, may continue to feel the pinch as construction backlog is completed and they’re looking for more work,” Mundt said.

Most businesses expect average to below-average spending on capital improvements, with a little more movement toward average than last quarter.

Expectations for hiring are average at best, with 6 percent expecting above-average hiring.

“Even for businesses reporting decreased labor demand, it doesn’t necessarily mean they are cutting workers,” Wirtz said. “Given the economic uncertainty, businesses seem to be nervous of over-investing here. And with the rapid evolution of AI, businesses are also seeing possible labor alternatives. So they are pulling the reins on workforce expansion.”

Perceptions of the overall business climate in Sioux Falls have dropped noticeably from a year ago, when 81 percent of CEOs said it was good or excellent. This year, that dropped to 63 percent.

“The share with a negative outlook has definitely grown, and that’s something to keep an eye on,” Wirtz said.

“There are clearly some economic concerns — tariffs and inflation to name two — but interest rates just got lowered, and the U.S. economy and consumer continue to be quite resilient, according to recent data.”

Perceptions of the U.S. business climate have dropped, too, but also increased on the high end. This year, 37 percent said it was good or excellent versus 35 percent one year ago, while 21 percent said it was poor versus 10 percent a year ago.

“Locally, it really comes down to the city’s remarkable growth. We’re seeing new construction, new businesses moving in, and people relocating here to fill those roles,” Leach said.

“The labor market is extremely tight, with unemployment at just 1.8 percent compared to the national rate of 4.3 percent in August 2025. Even if the national picture looks weaker, the visible signs of growth and opportunity here tend to foster a much more positive business sentiment than what we see at the national level.”

Sioux Falls Development Foundation resources

Do you have further information to share about conditions at your business? Or are you looking to connect to additional resources to support your growth? The Sioux Falls Development Foundation can assist you in the following areas:

• Workforce development: The Development Foundation offers programs and initiatives to help you attract, retain and develop your workforce. Contact Denise Guzzetta, vice president of talent and workforce development, at 605-274-0475 or deniseg@siouxfalls.com.
•  Business growth and expansion: Whether your business is planning an expansion in the next five years or facing risk factors impacting growth, the Development Foundation can help by discussing existing building space, available land, potential local and state incentives and other resources. Contact Mike Gray, director of business expansion and retention, at 605-274-0471 or mikeg@siouxfalls.com.

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