Inflation Continues to Haunt Pennsylvania Businesses
By Lowman S. Henry
Taxes and regulations have historically been the top concerns of Pennsylvania businesses. That changed in recent years as inflation raged out of control. Although the rate of inflation has lessened, the cumulative effects of the recent inflationary cycle continue to weigh heavily on businesses. Inflation remains the top concern of the respondents to the Spring 2025 Keystone Business Climate Survey.
The survey of the owners, top line executives, and managers of businesses across the commonwealth found nearly 20% tagging inflation as their top concern from a list of challenges facing business with current economic conditions coming in second with 14%. Forty percent indicated inflation is having a significant impact on their business operations with another 43% saying it is having a moderate impact. This has resulted in over 40% of the businesses raising prices and caused 16% to delay or cancel expansion plans.
As has been the case for the past few years, locating qualified employees was the next highest concern among just under 14% with an additional ten percent indicating keeping qualified employees is a top concern.
State taxes on business income are a top concern at 5% of the businesses as is government regulation. Three percent indicated a concern over federal taxes. Supply chain disruptions, which had been a top concern during the COVID-19 pandemic years fell to just 1%, this even with the uncertainty created by uncertain tariff rates.
Relative to tariffs, the businesses participating in the Spring Keystone Business Climate Survey on balance expect they will have a positive effect on the U.S. economy. Forty-two percent say the impact of tariffs will be positive, 34% expect the impact to be negative. Another 21% think it is too early to tell.
Congress is currently considering reauthorization of the tax policy changes included in the 2017 Tax Cuts & Jobs Act. Forty percent of respondents say a failure to reauthorize those changes would have a negative effect on their business, 22% expect allowing the tax cuts to expire would have a positive impact. Another 20% say allow the tax cuts to expire would have no impact.
Business Climate
The Spring 2025 Keystone Business Climate Survey found little change in attitudes toward business conditions since the Fall 2024 Keystone Business Climate Survey. When asked: In general, do you think business conditions in Pennsylvania are better, the same or worse than six months ago; 17% of respondents said conditions have gotten better, 41% say conditions have gotten worse, 40% said they have stayed about the same.
Last October, 17% reported improving business conditions, 45% though business conditions had gotten worse, and 35% said business conditions had remained about the same. There was a marginal decrease in the number of businesses saying conditions had gotten worse and a corresponding marginal increase in those saying conditions had remained about the same.
Looking ahead, 40% expect business conditions in Pennsylvania to get worse over the coming six months with 29% expecting conditions will improve and 24% expecting business conditions to remain about the same.
Thirty-one percent of the owners/CEOs/managers reported that employment levels at their business are lower now than they were six months ago. Fifteen percent say they have increased the number of people they employee. Forty-eight percent reported employment levels are about the same. Looking ahead six months; 24% expect to increase their number of employees with 22% expecting to employ fewer people. The rest expect employment levels to remain about the same.
Twenty-nine percent reported a decline in sales over the past six months with 19% saying sales have increased and 44% saying sales have remained about the same. Looking ahead six months, 36% expect to increase sales while 26% expect fewer sales. Thirty-one percent expect sales to remain about the same.
State Policy Issues
With the state budget deadline of June 30th rapidly approaching respondents to the Spring 2025 Keystone Business Climate Survey are split on how much more the commonwealth should spend. Governor Shapiro’s plan to increase spending in the 2025-26 state budget by about 9% is favored by 48% of those participating in the survey while 40% agree with state senate Republicans that the proposed increase is too much.
Energy needed to power artificial intelligence data centers, the increased use of electric vehicles, and other demands are placing a strain on the energy grid. When asked which energy source should be further developed to meet those needs 34% cited renewables (wind, soar, hydro power), 23% want increased natural gas production, 9% said nuclear. Another 22% said all of the above should be further developed.
There was a split on whether or not government mandates to increase reliance on “renewable energy” (wind, solar, hydropower) will generate enough electrical power to supply Pennsylvania’s energy needs; or whether such a requirement will place dependability of the energy grid at risk. Forty-four percent think reliance on renewables will provide enough power, 43% say such a reliance will place dependability of the energy grid at risk.
Both SEPTA (Southeastern Pennsylvania Transit Authority) and PRT (Pennsylvania Regional Transit) are facing large operating deficits. To fund those budget shortfalls, 25% of the respondents say state government should increase its financial contribution; 19% think the systems need reform and to be streamlined; 17% support fare increases; 15% think local government should contribute more; 10% say labor union contracts should be renegotiated, 5% support service cuts.
The state legislature is considering the regulation and taxing of skill video games. Fifty-seven percent agree that such games should be regulated and taxed, 37% disagree.
Job Approval
In the first rating of President Donald Trump’s second term the Spring 2025 Keystone Business Climate Survey found 49% of the respondents have a positive view of his performance in office with 43% holding a negative opinion. Forty-three percent have a positive view of Vice President J.D. Vance, while 42% have a negative view of his job performance.
U.S. Senator David McCormick’s initial job performance rating is 44% positive/31% negative. U.S. Senator John Fetterman posted a 41% positive/33% negative rating.
Thirty two percent have a positive view of the job being done by Federal Reserve Chairman Jerome Powell, 29% hold a negative view and 39% offered no opinion. Thirty percent approve of the job being done by U.S. Treasury Secretary Scott Bessent; 30% hold a negative view; 38% offered no opinion.
Governor Josh Shapiro earned a 50% positive job approval rating with 29% holding a negative view of the governor’s job performance and 21% offering no opinion. Attorney General David Sunday debuted with a 35% positive/25% negative rating. Auditor General Timothy DeFoor posted a 28% positive/25% negative rating. State Treasurer Stacey Garrity had a 33% positive/26% negative rating.
Respondents to the Spring 2025 Keystone Business Climate Survey hold a 44% positive/39% negative opinion of the job performance of the United State Senate. The United States House of Representatives posted a 37% positive/44% negative rating. Justices of the Supreme Court of the United States earned a 39% positive/39% negative rating. At the state level, the Pennsylvania State Senate posted a 38% positive/34% negative rating. The Pennsylvania House of Representative had a 39% positive/31`% negative rating. The Justices of the Pennsylvania Supreme Court earned a 37% positive/31% negative rating.
Methodology
The Spring 2025 Keystone Business Climate Survey was conducted April 29, 2025 – May 15, 2025 by the Lincoln Institute of Public Opinion Research, Inc. with a total of 211 completed responses. Of those, 35% were the owners of the business; 20% the CFO/COO/CFO; 9% a local manager and 8% a state manager.
Complete numeric results are posted at www.lincolninstitute.org and www.patownhall.com
(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly American Radio Journal and Lincoln Radio Journal. His e-mail address is lhenry@lincolninstitute.org.)
Permission to reprint is granted proved author and affiliation are cited.
