July 2025: 1.95% (A+ grade)

Federal inventionINDEX July 2025: 1.95% (A+ grade)

The inventionINDEX measures innovation output by comparing GDP growth with patent production growth. 

Anything over C grade is positive sentiment; anything under C is negative outlook/sentiment. Using that sentiment, it is possible to observe trends over time, and also compare states/countries. In doing so, we can predict which states have the best chance to recover economically from the pandemic (or any other economic incident that may occur).

Federal inventionINDEX Scores – Last 12 months

The inventionINDEX score for July 2025 stands at 1.95%, earning an A+ rating, a notable position when viewed against the last 60 months of historical data. This score is significantly higher than the overall average of 1.60% for the entire period and also surpasses the average of 1.51% recorded over the past year. This recent performance reflects a positive trajectory, following a period of fluctuation that included scores such as the 1.32% in June 2025 and the 1.22% low in November 2024. The latest score is on par with other recent peaks, such as the 2.03% in January 2024 and the 1.86% in October 2024.

A consistently high inventionINDEX score, such as the current A+ rating, generally indicates a robust and thriving ecosystem of innovation. This upward trend suggests a favorable environment for new ideas, a high volume of patent applications, and increased investment in research and development. A high score can serve as a catalyst for economic growth, attracting capital and talent from around the world. It provides confidence to investors and policymakers, reinforcing the nation’s competitive advantage in a globalized marketplace. This positive momentum can lead to the creation of new industries and high-value jobs, contributing to long-term economic prosperity.

Conversely, a lower inventionINDEX score and rating can be a signal of economic headwinds or a decline in innovative activity. For example, the lowest recorded score of 1.18%, which resulted in a C+ rating in January 2022, suggests a period of stagnation. Such a downturn could be an early indicator of reduced business investment, a slowdown in technological breakthroughs, and a lack of new ventures. These periods of underperformance can lead to a less dynamic economy, a decrease in global competitiveness, and a potential brain drain as creative talent seeks more fertile ground for their ideas. A low score warrants a thorough examination of the underlying factors that might be impeding progress.

The historical data reveals that the inventionINDEX score is not static but rather follows a cyclical pattern, with significant peaks and troughs over time. The record high of 2.31% in October 2023 and the low of 1.18% in January 2022 highlight the dynamic nature of this metric. The recent performance of 1.95% in July 2025 positions the current period as one of notable strength and recovery. The inventionINDEX serves as an essential barometer for the health of the economy, providing valuable insights into the forces that shape innovation and, by extension, the nation’s economic future.

Discussion:

In July, the Federal inventionINDEX scored a positive sentiment which was higher than the previous year’s average and outperformed the downward trend for the year. This is similar to the prior 12 months, which experienced a downward trend. 

As the economy continues to stabilize in the post-pandemic era, it remains uncertain whether any backlog of applications still exists or if the department has returned to normal processing timelines. The inventionINDEX could also be affected by lingering consequences from the pandemic, such as company closures, reduced workforces, and limited R&D capabilities, which may still be impacting current operations.

Learn More:

Are you thinking of patenting any of your bright ideas? Did you know your research work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? To find out more, please check out our free online eligibility test.

Feel free to book a quick teleconference with one of R&D tax specialists if you would like to learn more about R&D tax credit opportunities.

Who We Are:

Swanson Reed is the largest Specialist R&D tax credit advisory firm in the United States. With offices nationwide, we are one of the only firms globally to exclusively provide R&D tax credit consulting services to our clients. We have been exclusively providing R&D tax credit claim preparation and audit compliance solutions for over 30 years. 

Swanson Reed hosts daily free webinars and provides free IRS CE and CPE credits for CPAs.  For more information please visit us at www.swansonreed.com/free-webinars or contact your usual Swanson Reed representative.

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