We propose a simple agent-based macroeconomic model in which frms hold heterogeneous sales expectations. A frm may either optimistically expect an increase in its sales or pessimistically expect the opposite. Whether a given frm is optimistic or pessimistic depends on macroeconomic conditions and the average mood prevailing within its social/local neighborhood. For instance, the probability of a frm taking an optimistic view increases not only during a boom but also with the number of its optimistic neighbors. We show that such an economy may give rise to co-evolving dynamics between the business cycle and the frms’ average sentiment.