For small businesses, these are the 3 economic metrics that really matter in 2025

If you're running a business you have to pay close attention to the economy. Failure to do so means you could be making bad decisions.

Of course, there’s no crystal ball and economists are often wrong. But in the 20+ years I’ve been running my business, I’ve learned from some very smart leaders which economic metrics they follow. These metrics change each year, depending on circumstances. This year, these three are the ones they’re closely watching.

10-year Treasury bond yields

Treasury bonds are sold by the U.S. government. They promise to pay a certain level of interest. However, investors want to make sure the interest they receive stays ahead of inflation. If the stated interest on a bond is less than what an investor hopes to earn — given future inflation predictions — the investor will pay less for the bond. When the investor pays less for the bond, its yield — the interest it pays as a percentage of the bond price — is higher.

Why is this important for a business owner? It’s because the yield on a Treasury bond is telling us what the market thinks about inflation. As I write this, the yield is roughly 4.5% and it’s been ranging between 4% and 5% since last October. Inflation, measured by the consumer price index, is about 4%.

The market thinks inflation is going to be as high, if not higher than it is right now. That could be for a number of reasons — tariffs, money supply, predicted inventory shortages. But that’s no matter to you or me. What matters is that we should build in these inflation expectations when we’re pricing our products and managing our overhead.

These yields also drive mortgage rates. No bank wants to fix a mortgage at a rate that may put them under water if inflation rises. So as Treasury bond yields increase, so will mortgage rates, which are currently around 7%. Mortgage rates also are extremely important when considering that the U.S. real estate industry is about 12% to 13% of our total economy and directly and indirectly impacts countless small businesses in the market.

Federal Funds rate

The Federal Funds rate is the rate the Federal Reserve uses when making funds available to banks. The bank pays that rate to the Fed for money and then turns around and lends that money to businesses and others at a rate higher than what it pays so it can make a profit.

Currently, the Federal Funds rate is around 4.5%. The rate was close to zero as recently as February 2022. The Federal Reserve uses this rate as one of its tools to fight inflation. If its economists are seeing higher inflation it will raise rates to restrict the flow of money into the economy to give currency more value. If that risk subsides, it will lower the rate. The Federal Reserve now is under pressure by the White House to lower rates. It may do so later this year.

This is important for a business owner because when the Federal Funds rate is decreased, most banks then lower their prime rates — the rates they charge their best business customers — for lending money. Currently, the prime rate nationally is about 7.5%. Most small businesses pay more than prime, sometimes one to three points above. Borrowing costs are relatively high right now, which impedes investment and spending.

Baltic Dry Index

This little-known metric is being closely watched in these times of tariff uncertainty and supply chain disruption. The Baltic Dry Index is an index representing the cost of the freight through the Baltic Sea, one of the world’s most traversed shipping lanes. It is a great reflection of the supply and demand of global shipping. When the index falls it means there’s less demand for freight, which indicates a slowdown in shipping. When it increases it means shipping is ticking up and freight costs are rising due to competition. Currently, the Baltic Dry Index has been falling.

U.S. consumers drive the world economy and despite Washington’s hope to change, much of what we buy comes from overseas. Consumer sentiment and optimism surveys are nice. But in the end, it’s important to measure what’s being spent. When the Baltic Dry Index falls it means that there’s less commerce from overseas, less products being purchased by retailers and distributors who sell to consumers. This means a probable fall off in overall economic activity.

There are plenty of economic metrics to follow. There’s an overload of economic news in the media. But my best clients who have been running businesses for a long time are looking closely at the above three metrics this year to help them guide their decisions.

Know that these metrics will change. In times where interest rates, inflation and tariffs are not as critical other indicators take their place. But for this year it’s important to keep your eyes on this data if you want to make the best decisions for your business.

• Gene Marks is a CPA who owns and operates The Marks Group PC, experts in customer relationship management technologies.