Survey points to ’04 economic growth
Local employers expect gains in sales, profits and employment
By Steve Jagler, SBT Executive Editor
A new survey by the Metropolitan Milwaukee Association of Commerce indicates that southeastern Wisconsin’s economy has finally bottomed out and will rebound significantly in 2004.
In the MMAC’s first-quarter 2004 Business Outlook Survey of area business executives, 75% of the respondents project sales increases, 71% project profit gains and 48% expect employment growth for their companies in 2004.
The economic outlook for 2004 is the brightest since the MMAC’s survey of early 2000, according to Bret Mayborne, director of economic research for the organization.
"This is the first survey we’ve seen since 2000 in which we’ve seen results reflective of a growth phase," Mayborne said. "We’ve hopefully passed that turning point. These survey results suggest that we’ve turned the corner. Improvements are in store in 2004."
The newest survey results are notably bullish:
— 75% of the respondents project increases in sales at their companies (up from 65% a year ago), while only 6% project declines and 18% project no change.
— 71% of the respondents project profit increases (up from 60% a year ago), while only 10% project profit declines and 19% expect no change.
Another key component of the survey is job growth. In a typical economic recovery cycle, job growth is a lagging indicator that emerges after sales and profit increases.
That scenario appears to be playing out in southeastern Wisconsin. Nearly half (48%) of the respondents in the MMAC survey expect job gains in 2004, outnumbering those foreseeing declines (11%) by more than a four-to-one ratio and 41% who foresee no changes.
"Job levels in the metro area failed to turn the corner in 2003, falling at a 1.2% rate over 2003’s first 10 months. A more positive job outlook is forecast for 2004," Mayborne said. "I think we’re getting closer. We’re still showing some losses in employment into October. The survey results show there will be some reversal in 2004."
Mayborne said he does not expect to see tangible improvement in local employment until the latter part of the first quarter or early in the second quarter.
An improving job picture may lead to higher worker earnings increases in 2004, he said. The increase in per-employee wages and salaries is forecast at 2.6% over the next 12 months, up from the 2% projected just three months ago.
Rising sales and profits also tend to lead to increases in capital investments for businesses. According to the newest survey, the companies predicting capital spending increases (41%) far outnumber those expecting decreases (16%), although 43% foresee no changes.
Another notable indication in the newest survey is the optimism of the region’s manufacturing companies. According to the survey, 80% of the manufacturers expect sales growth in 2004, compared with 74% of the non-manufacturers. Similarly, 76% of the manufacturers forecast profit increases, compared with 69% of the non-manufacturers.
The rebounding of the local economy and the local manufacturing sector also is reflected in the BizTimes Stock Index, which measures the combined values of the stock shares for publicly held companies headquartered in southeastern Wisconsin.
The BizTimes Stock Index roared to a 52-week high of 138.28 in late December, mirroring the larger Dow Jones Industrial Average’s recent charge past the 10,000 mark.
The local stock index is a joint project of Small Business Times (www.biztimes.com) and North Shore Bank (www.northshorebank.com) and is updated daily on their Web sites.
The stocks for key manufacturers featured in the BizTimes Stock Index, including Rockwell Automation Inc., Johnson Controls Inc., Harley-Davidson Inc., Modine Manufacturing Co., Briggs & Stratton Corp., Badger Meter Inc. and Brady Corp., all have risen to or near 52-week highs as the new year approaches.
R.W. Baird & Co. analysts have placed "outperform" outlook ratings on the stocks of several southeastern Wisconsin manufacturers.
Richard Eastman, Baird’s senior research analyst, believes American manufacturers are finally on the verge of stemming a three-year recession in which the depreciation of their equipment and facilities outpaced their capital investments.
"Companies are very lean, and we’ve continued to see productivity gains," Eastman said. "This three-year recession in business investments seems to be turning, and we hope a similar up-cycle can take place."
Full results of the MMAC’s Business Outlook Survey will be posted at www.mmac.org.
Dec. 26, 2003 Small Business Times, Milwaukee
