The American economic landscape is showing promising signs of resilience, particularly within the middle market sector – companies typically generating between $10 million and $1 billion in annual revenue that form the backbone of the U.S. economy. According to RSM’s latest Middle Market Business Index (MMBI), released yesterday, these vital enterprises are experiencing their strongest performance outlook since before the pandemic disruptions.
The MMBI surged to 133.1 in the first quarter of 2025, representing a 7.5-point increase from the previous quarter and reaching its highest level since Q4 2019. This notable improvement reflects growing confidence among mid-sized businesses despite persistent economic headwinds, including sticky inflation and tightened monetary policy.
“Middle market businesses are adapting to the new normal of elevated interest rates and finding ways to drive growth,” said Joe Brusuelas, RSM’s chief economist, in a conversation following the report’s release. “These firms have demonstrated remarkable agility through challenging cycles, and we’re now seeing a return to robust revenue expectations and capital expenditure plans.”
The data shows 58% of middle market executives surveyed reported increased revenues in Q1 2025, up from 49% in the previous quarter. Even more telling is the forward-looking sentiment, with 65% expressing confidence that revenues will continue rising over the next six months – a seven percentage point jump from Q4 2024.
This optimism appears well-founded. The Federal Reserve’s March Economic Projections maintain GDP growth estimates at 2.1% for 2025, suggesting a soft landing scenario has successfully played out. While this represents moderate rather than explosive growth, it provides the stability middle market businesses require for long-term planning.
Employment trends within the sector reveal a nuanced picture. Approximately 44% of firms reported hiring increases in Q1, relatively unchanged from the previous quarter. However, wage pressures continue to ease gradually, with 56% of companies reporting higher compensation costs compared to 61% in Q4 2024.
“Labor markets are finally normalizing after years of extreme tightness,” explained Nelly Montoya, senior economist at Goldman Sachs. “Mid-sized businesses are finding it easier to attract qualified talent without resorting to extraordinary wage premiums, though compensation remains historically elevated.”
Perhaps most encouraging is the capital expenditure outlook. After several quarters of cautious investment approaches, 42% of middle market executives now plan to increase capital spending over the next six months – the highest percentage since early 2022. This signals growing confidence in future business conditions and suggests a strengthening economic foundation.
The regional breakdown reveals interesting divergences. Coastal regions are experiencing stronger performance metrics, with the Northeast and West Coast MMBI subindices at 138.4 and 136.7, respectively. Meanwhile, the Midwest (129.3) and South (131.5) show positive but more moderate sentiment.
Industry variations also emerged clearly in the data. Technology, healthcare, and professional services firms reported the strongest outlook, while manufacturing and retail sectors demonstrated more measured optimism. Construction remains surprisingly resilient despite elevated interest rates, with 52% of construction-focused middle market firms projecting revenue growth.
“The sectoral differences tell an important story about structural economic shifts,” noted Jennifer Thompson, Director of Industry Analysis at Moody’s. “Knowledge economy sectors are outpacing traditional industries, but the gap is narrower than many predicted, suggesting a balanced expansion rather than a bifurcated recovery.”
Inflation concerns, while still present, have moderated substantially. Only a third of respondents now cite inflation as their primary business challenge, down from nearly half a year ago. This aligns with the Consumer Price Index data showing headline inflation decelerating to 2.4% annually – approaching the Federal Reserve’s 2% target.
Supply chain disruptions, which dominated business concerns from 2020 through 2023, have largely normalized. Just 24% of middle market executives reported significant supply chain challenges in Q1 2025, compared to 67% at the height of the disruptions in 2022.
The MMBI data also reveals shifting financing conditions. While interest rates remain elevated, access to capital has improved. Sixty-three percent of respondents reported “good” or “excellent” access to credit markets, up from 52% in the previous quarter. This suggests regional and community banks – traditional lenders to middle market businesses – have adapted their risk models to the higher rate environment.
“We’re seeing a renaissance in relationship banking,” observed Melissa Johnson, senior banking analyst at Keefe, Bruyette & Woods. “Mid-sized businesses with established banking relationships are finding capital readily available, albeit at higher costs than the near-zero rate era.”
Global economic factors continue influencing the middle market outlook. Nearly 40% of respondents with international operations reported improved global business conditions, with particular strength in Southeast Asian markets. However, persistent geopolitical tensions in Eastern Europe and the Middle East remain risk factors for businesses with global supply chains.
The MMBI survey, which collected responses from over 700 middle market executives across industries, provides a comprehensive snapshot of this critical economic segment. These businesses collectively employ approximately one-third of the U.S. private sector workforce and contribute about 40% of GDP.
As the economy continues navigating post-pandemic normalization, the middle market’s resilience and forward-looking confidence suggest America’s economic engine is regaining momentum. While challenges remain, the data points to sustainable growth rather than boom-and-bust volatility – precisely the environment where mid-sized businesses historically thrive.
