Jan. 6, 2025

Business conditions improved in the final quarter of 2024, according to Sioux Falls CEOs, but they’re expressing mixed opinions on how the first part of the new year could go.

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 60 CEOs and business owners.

Overall, 78 percent said conditions in their businesses were good or excellent, up from 73 percent in September 2024 but down from 82 percent one year ago.

Almost half reported an increase in sales activity in the prior quarter, with 30 percent reporting a decrease.

Several factors contribute to this trend, said Raymond Leach, director of fintech at Augustana University.

“First, the GDP estimate for the third quarter was recently revised upward, from 2.8 percent to 3.1 percent annually, indicating stronger than anticipated economic performance. Second, there have been two additional quarter-point cuts to the federal funds rate, which may further stimulate growth,” he said.

“Third, holiday spending is on track to surpass previous years’ records. Finally, the fourth quarter is traditionally the strongest period for businesses. All of these factors combined should have businesses feeling good through the fourth quarter.”

Prices for products and services continued to increase, with almost half of CEOs reporting that they increased prices at least slightly in the fourth quarter, compared with 36 percent in the third quarter.

More than one-third reported increasing their hiring in the fourth quarter, which was down from 44 percent three months prior.

“We’ve seen similar improvements in recent surveys,” said Ron Wirtz, regional outreach director for the Minneapolis Federal Reserve.

“What’s interesting is that recent sales activity has declined modestly. Hiring has also slowed, though plans for future hiring have remained pretty consistent with past surveys.”

The uptick in prices “would seem to match recent data showing a slight uptick in inflation/CPI rates,” he added.

Looking ahead, CEOs were less optimistic about the coming quarter.

Thirty-four percent said they expected above-average business activity, while 47 percent expect average activity, and 17 percent anticipate below-average business activity.

“It seems as if the post-election comfort has set in as our companies are more positive about their business conditions. However, prices have increased while sales, hiring and investments in capital improvements have slowed, indicating what I believe is a “wait and see” attitude by our business community,” said Bob Mundt, president and CEO of the Sioux Falls Development Foundation.

“Seeing how the next few months of the new administration and the new legislatures on both the state and national level will play out in terms of inflation, tariffs, policy and world stability will be key.”

There is significant uncertainty surrounding the incoming president’s policies as he prepares to take office, Leach agreed.

“Mr. Trump has proposed raising tariffs on the United States’ three largest trading partners — China, Mexico and Canada — as well as implementing tax cuts and stricter immigration policies, including deportation of undocumented immigrants,” he said. “These measures could have inflationary effects on the U.S. economy. Although it remains uncertain how much of this agenda will be realized, such unpredictability is likely to make business owners cautious about hiring and spending in the short term.”

Looking ahead at capital expenditures, 21 percent of Sioux Falls CEOs forecast above-average spending, while 57 percent expect average spending and 16 percent are below average. That’s similar to three months ago.

In hiring, almost 70 percent expect average or above-average hiring in the first quarter, compared with 77 percent three months ago.

“Sioux Falls is regressing to the mean, but slowly, from almost fairy-tale economic levels,” Wirtz said. “There is not a single indicator anywhere close to negative territory. Some have slipped moderately, but many measures also seem to be stabilizing at what would still be pretty positive levels of sentiment.”

Sentiment about the U.S. business climate trended up somewhat.

Forty-two percent of Sioux Falls CEOs said it’s good or excellent, compared with 35 percent three months ago.

“Overall, it was a pretty good year for business in Sioux Falls and the United States. We will wait and see how the environment changes as we transition between the Biden and Trump administrations,” Leach said.

In Sioux Falls, sentiment trended down a bit, with 74 percent saying the city’s business climate is good or excellent. versus 81 percent three months ago.

“Recent articles about restaurant and brewery closures in Sioux Falls serve as a sobering reminder of the highly competitive business environment. As the city continues to grow and attract new businesses, existing establishments face increasing challenges in competing for both sales and workforce talent,” Leach said.

Despite these pressures, “the overall perception remains positive at both the local and national levels, with many feeling optimistic about the future,” he added. “The prospect of reduced regulations and lower taxes during a second Trump term likely contributes to this optimism as businesses look ahead to the new year.”

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.