South Dakota Firms Faced Rising Costs and Rates
Business leaders are weighing higher input expenses against the persistent challenges of a tight labor market.
Updated on Sept. 29, 2026 in Inflation
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South Dakota executives reported that rising material costs and higher benchmark interest rates have pressured margins across the state. These inflationary headwinds are expected to drive consumer price increases in the near term.
Why it matters
Business operators face a dual squeeze as tariffs on imported materials collide with tighter credit conditions following the Federal Reserve's September 2026 rate hike. The combination of elevated input costs and an extremely low unemployment rate has intensified operational overhead.
The cost of electrical transformers has climbed 400% since 2020, while the state maintains a tight 2% unemployment rate. Local businesses now compete for capital against large-scale AI infrastructure projects.
The players
NorthWestern Energy
An energy provider and utility company currently pursuing a merger with Black Hills Energy.
Journey Group
A construction and development company currently navigating increased material and labor costs.
Federal Reserve
The central banking system responsible for setting the benchmark interest rates that govern capital access for businesses.
The details
Companies are currently managing margins by pursuing strategic consolidation, such as the proposed merger between NorthWestern Energy and Black Hills Energy. Firms like Journey Group are absorbing some costs internally, but rising tariffs on metal and wood have made it difficult to maintain pricing. Restricted labor availability remains a significant bottleneck to scaling operations.
Timeline
2020: The cost of electrical transformers began a 400% increase.
September 2026: The Federal Reserve raised the benchmark interest rate.
September 24, 2026: Executives gathered at the Sioux Falls Metro Economic Briefing.
Market Landscape
This trend aligns with the broader pressures created by the 2026 Federal Reserve benchmark interest rate hike. Businesses are increasingly turning to M&A activity to mitigate supply chain volatility and capital costs.
Operators should review their supply contracts to assess exposure to metal and wood tariffs. Managers must also prepare for rising utility overhead as local energy providers seek to pass through increased operational costs.
The takeaway
The combination of 400% higher hardware costs and a 2% unemployment rate creates a difficult environment for expansion. Owners should monitor local utility rate filings as an early signal for broader inflationary pressure on their own operational budgets.
Further reading
For broader trends on price volatility, visit the Inflation section.
Source note: This article includes information reported by Brookings Register.
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