Sioux Falls CEO survey shows ‘broad softening of sentiment’

Jan. 5, 2026

Conditions at Sioux Falls businesses appear to have deteriorated to end the year, though leaders generally are optimistic about the start to 2026.

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-December and completed by nearly 70 CEOs and business owners.

When asked about overall conditions at their businesses, CEOs were the least positive they’ve been in 2025, with 14 percent calling conditions excellent, down from 23 percent three months prior and 28 percent at the end of 2024. A combined 62 percent said conditions were good or excellent, down from 73 percent in the prior quarter and 78 percent one year ago, while 38 percent described them as fair or poor, up from 27 percent in the prior quarter and 22 percent one year ago.

“The most notable trend this quarter is a broad softening of sentiment across several measures,” said Raymond Leach, director of fintech at Augustana University, noting that in some cases, “we have not seen sentiment at this level since Q1 and Q2 of 2020 during the onset of COVID-19, making this a significant departure from recent trends.”

Less than half — 47 percent — experienced a sales increase in the past quarter, similar to the third quarter, while 40 percent saw a decrease, up slightly from the third quarter.

“These results are not entirely surprising,” Leach said. “Broader measures of consumer confidence in the U.S. have been declining since the start of the year. Our survey historically shows that local sentiment tends to lag national trends, so it is reasonable that these effects are now becoming more apparent at the local level.”

Prices continued some upward momentum, with 43 percent reporting at least a slight increase in their prices for products and services, though that was down from 46 percent in the prior quarter. Forty-one percent had no change in pricing, similar to the prior quarter, while 17 percent reported they decreased prices.

Hiring largely was flat, with 56 percent reporting no change in the fourth quarter, while 27 percent reported at least a slight increase and 17 percent saw a decrease.

Broader national economic conditions appear to be playing a meaningful role, Leach said.

“The U.S. economy is cooling, though recent data have been somewhat difficult to interpret due to temporary gaps in national reporting caused by the federal shutdown,” he said.

“Even so, the data we do have points to continued headwinds. Core PCE (personal consumption expenditures) inflation remained elevated at 2.8 percent in September, keeping pressure on household budgets. At the same time, unemployment has been slightly increasing, reaching 4.6 percent in November. While not bad by any means, these trends can weigh on consumer confidence.”

That said, initial estimates of real GDP growth in the third quarter reached 4.3 percent, “driven largely by consumer spending, rising exports and falling imports,” he said.

“This divergence helps explain why conditions feel uneven. Nationally, headline growth remains solid, but inflation and labor markets are softening.  Locally, rising prices and slowing job growth are likely making consumers more selective about where they spend their money.”

Looking ahead, 18 percent of CEOs said they expect above-average business activity in the first quarter of 2026, compared with 27 percent who expected it in the fourth quarter of 2025.

Fifty-two percent expect average activity to start the year, while 30 percent anticipate below-average activity.

“People are conservatively optimistic,” said Bob Mundt, president and CEO of the Sioux Falls Development Foundation. “They’ve got a few more checks and balances in place as they move forward with decisions. There’s still a little uncertainty about what will happen after the first of the year, but once we get past this new year, I think there will be some things that break that have been pent up over the last six to 12 months. I’m just getting that vibe.”

One factor on the horizon is the implementation of the tax provisions from the One Big Beautiful Bill Act, which will affect refunds for taxpayers filing their 2025 returns in early 2026, Leach added.

“If households receive larger refunds and choose to spend them locally, this could provide a short-term boost to Sioux Falls businesses,” he said, noting that unemployment also is well below the national average and “continues to support local income and spending.”

Sixty-three percent of CEOs anticipate at least average spending on capital in the first quarter of 2026, compared with 71 percent in the prior quarter. Twenty-seven percent expect below-average spending, and 9 percent weren’t sure.

“I think they’re kicking tires, they’re getting stuff in order, mitigating as much risk as they can, so they’re taking longer to make decisions,” Mundt said. “Some things they have to get in order in their corporations before they pull the trigger on something like a new building or new investment.”

When it comes to tariffs, “I think people have kind of adjusted,” Mundt said. “I hear it most from the construction industry about tariffs on lumber, but with construction slowing anyway, the demand has slowed, so I’m not sure that’s as big of an issue.”

CEOs also are showing some uncertainty around hiring. Fourteen percent expect above-average hiring to start the year, while 44 percent said it will be average, 29 percent expect below-average hiring, and 14 percent aren’t sure.

CEOs also are showing some downward trending in their overall impression of the business climate in Sioux Falls as well as nationally.

Fifty-six percent said the Sioux Falls business climate was good or excellent, compared with 63 percent in the prior quarter and 74 percent a year ago.

For the U.S. business climate, 26 percent said it was good or excellent, down from 37 percent in the prior quarter and 42 percent a year ago.

“Taken together, these results suggest that while the local economy remains fundamentally solid, businesses are becoming more cautious,” Leach said.

“The combination of national economic uncertainty, continued elevated inflation and signs of slowing momentum is influencing expectations and decision-making. While Sioux Falls continues to outperform many national indicators, the survey results indicate that local businesses are not immune to broader economic trends and are entering the new year with increased caution.”

From a political perspective, Mundt noted that “locally, it’s an election year, we have state people being elected, our governor being elected. … I don’t know what effect that has on the business community, but it certainly could have an effect on the overall community and state.”

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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