Survey results show continued optimistic outlook
and solid business conditions
CHICAGO, March 28,
2024 /PRNewswire/ -- The RSM US Middle Market
Business Index (MMBI), presented by RSM US LLP ("RSM") in
partnership with the U.S. Chamber of Commerce, eased slightly to
130.8 in the first quarter from 132.3 at the close of last year on
a seasonally adjusted basis. The MMBI survey results reflect a
self-sustaining economy and robust labor market supported by middle
market firms that continue to reinvest earnings into
productivity-enhancing expenditures.
"The primary takeaway from this quarter's survey is that middle
market executives are bullish on the year even as economic growth
moderates from the blistering 3.1% pace of last year," said
Joe Brusuelas, chief economist with
RSM US LLP. "It is not surprising that a three-year period of solid
investment in firms' ability to produce has resulted in an average
increase of 3.9% in American productivity over the past three
quarters. While such robust gains in productivity are
unsustainable, anything at or above 2.5% bodes well for an economy
that can grow at a faster pace, retain a low unemployment rate and
obtain price stability, all while bolstering living standards for
all."
Middle Market Firms Optimistic About Future Economic
Conditions, Revenues and Net Earnings
MMBI survey
results from the first quarter reflect the economy's resilience,
with 45% of middle market executives noting an improvement in
current economic conditions. Forty-six percent of respondents also
said their gross revenues and net earnings improved in the first
quarter and 48% said they accelerated their investments in capital
expenditures.
A sense of optimism is inferred from respondents when asked
about their expectations over the next six months. Sixty-two
percent of executives said they anticipate an improvement in
economic conditions and 67% said they expect an improvement in both
net earnings and revenues over the next half year.
"Middle market businesses' continued optimism reflects the U.S.
economy's ongoing strength," said Neil
Bradley, executive vice president and chief policy officer
at the U.S. Chamber of Commerce. "It's encouraging that businesses
in the middle market remain positive about the economic outlook and
their own revenue growth despite the fact that rising regulatory
burdens and workforce challenges are creating headwinds and
constraining growth."
Further underscoring the buoyant outlook among middle market
executives, 59% indicated they intend to bolster
productivity-enhancing capital expenditures. Notably, for 14
straight quarters, most survey respondents have said they plan to
increase outlays on software, equipment and intellectual property
that make up cumulative capital expenditures.
Pricing Concerns Remain, though Demand is Strong and
Competitive Labor Market Persists
Pricing
continues to be a top concern in the middle market. Seventy-three
percent of executives said they paid higher prices for goods and
services, while 68% expect to do so going forward. Nearly half
(48%) said they passed along those higher prices and 58% indicated
they intend to do so over the next six months.
Although inflation is slowing, RSM anticipates middle market
firms will retain some measure of pricing power given the strong
level of aggregate demand, which underscores the fact that 45% of
executives said they increased inventories this quarter. In
addition, 58% said they intend to increase inventories over the
next six months, reflecting robust expectations around gross
revenues and net earnings.
One sign that may indicate that robust business conditions and
rising revenues have provided a much-needed respite from the
pricing pressures of the past three years is a decline in planned
borrowing. Only 19% of senior managers from the middle market
companies indicated their access to credit was easier and 43% of
these managers said they plan to borrow more capital going forward
– both figures eased from last year.
Hiring and compensation remained rock solid in the first
quarter, with 44% of executives noting they had increased hiring
and 58% saying they intend to do so over the next six months. In
addition, 54% of executives said they increased compensation to
obtain workers and 65% said they expect to do so this year. With
the U.S. economy at what RSM considers to be full employment, wage
competition for midcareer, value-adding employees will remain
challenging.
The survey data that informs this index reading was gathered
from 403 respondents between Jan. 8 and Feb.
16, 2024.
About the RSM US Middle Market Business
Index
RSM US LLP and the U.S. Chamber of Commerce have
partnered to present the RSM US Middle Market Business Index
(MMBI). It is based on research of middle market firms conducted by
Harris Poll, which began in the first quarter of 2015. The survey
is conducted four times a year, in the first month of
each quarter: January, April, July and October. The survey
panel consists of approximately 1,500 middle market executives and
is designed to accurately reflect conditions in the middle
market.
Built in collaboration with Moody's Analytics, the MMBI is borne
out of the subset of questions in the survey that
asks respondents to report the change in a variety of
indicators. Respondents are asked a total of 20 questions patterned
after those in other qualitative business surveys, such as those
from the Institute of Supply Management and National Federation of
Independent Businesses.
The 20 questions relate to changes in various measures of their
business, such as revenues, profits, capital expenditures, hiring,
employee compensation, prices paid, prices received and
inventories. There are also questions that pertain to the economy
and outlook, as well as to credit availability and borrowing. For
10 of the questions, respondents are asked to report the change
from the previous quarter; for the other 10 they are asked to state
the likely direction of these same indicators six months
ahead.
The responses to each question are reported as diffusion
indexes. The MMBI is a composite index computed as an equal
weighted sum of the diffusion indexes for 10 survey questions plus
100 to keep the MMBI from becoming negative. A reading above 100
for the MMBI indicates that the middle market is generally
expanding; below 100 indicates that it is generally contracting.
The distance from 100 is indicative of the strength of the
expansion or contraction.
About The U.S. Chamber of Commerce
The U.S. Chamber of Commerce is the world's
largest business organization representing companies of all sizes
across every sector of the economy. Members range from the small
businesses and local chambers of commerce that line the Main
Streets of America to leading industry associations and large
corporations.
They all share one thing: They count on the U.S. Chamber
to be their voice in Washington,
across the country, and around the world. For more than 100 years,
we have advocated for pro-business policies that help businesses
create jobs and grow our economy.
About RSM US LLP
RSM is the leading provider of
professional services to the middle market. The clients we serve
are the engine of global commerce and economic growth, and we are
focused on developing leading professionals and services to meet
their evolving needs in today's ever-changing business landscape.
Our purpose is to instill confidence in a world of change,
empowering our clients and people to realize their full
potential.
RSM US LLP is the U.S. member of RSM International, a global
network of independent assurance, tax and consulting firms with
64,000 people in 120 countries. For more information,
visit rsmus.com, like us on Facebook, follow us
on X and/or connect with us on LinkedIn.
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SOURCE RSM US LLP