MMAC Business Outlook Survey is bleak

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Milwaukee-area businesses have very limited expectations toward growth prospects in 2009, according to a Business Outlook Survey conducted by the Metropolitan Milwaukee Association of Commerce (MMAC).

Only 32 percent of businesses surveyed see sales increases in 2009, only 32 percent predict profit gains and only 26 percent expect employment growth for their local operations.

“Expectations for the coming year are as low as they have been in the years that the Business Outlook Survey has been conducted in a comparable manner (since 1994),” said Bret Mayborne, MMAC’s economic research director. “The survey results do not bode well for near-term growth prospects for the local area. The hope would be that the national and metro area economies have bottomed out in recent months with prospects for an improving picture coming in 2009’s second half.”

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Among Milwaukee-area businesses, a larger percentage of surveyed companies see real sales declines in 2009 (42 percent) than sales increases (32 percent), while 26 percent see no change.

Businesses have significantly lower expectations now than at the beginning of 2008. The calendar year 2008 opened with 69 percent predicting sales increases for the year as a whole.

Pessimism is strongest among manufacturers. Over half of manufacturers surveyed (56 percent) see sales declines for the new year, while 24 percent see increased sales levels. Among non-manufacturers, those predicting sales gains (37 percent) slightly outnumber companies forecasting more sales declines (33 percent).

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Expectations vary little by company size. Thirty-three percent of larger employers (100 or more employees) forecast 2009 sales gains vs. 31 percent among smaller employers. Conversely, 43 percent of larger employers expect 2009 sales declines vs. 40 percent among small employers.

Nearly half (49 percent) of all employers surveyed forecast declining profit levels in 2009 (vs. 2008). Thirty-two percent see profit increases for the year, while 19 percent expect no change. The percentage now expecting profit increases in the coming year represents a markedly smaller portion than the 61 percent who forecast profit gains one year ago (for 2008).

Capital spending plans for 2009 were particularly weak. Only 18 percent of all companies surveyed forecast a rise in capital expenditures for the year. Fifty-six percent see capital spending declines, and 27 percent expect no change. The percentage predicting increases is down from the 38 percent who opened 2008 expecting capital spending gains.

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Through November 2008 (latest available), year-over-year employment declines were posted in each of 2008’s first 11 months, with declines averaging 0.7 percent. Survey results suggest that job decreases are likely to continue well into 2009. Forty-three percent of all those surveyed expect declines in their local workforces in 2009, outnumbering those predicting job increases (26 percent) by a significant margin. Thirty-one percent see no change.

Manufacturers and large employers are most likely to see employment declines in the coming year. Nearly half (48 percent) of manufacturers predict job reductions in 2009, while 51 percent of large employers forecast employment decreases. In both cases, those expecting declines outnumber those seeing job increases by over a two-to-one margin.

Historically low wage and salary expectations have resulted from the metro area’s weak job market. Over the next 12 months, the average change in per employee wages and salaries is forecast to rise only 1.3 percent, down from the 2.9 percent annualized increase predicted in 2008’s fourth quarter.

The slumping economy has largely doused any inflationary concerns. Forty-five percent of all companies surveyed see inflation falling in the 0 to 2 percent range for 2009, while the largest number (50 percent) expects price increases of 3 to 5 percent. Only five percent predict price gains of 6 percent or higher.

Quarterly business expectations largely mirrored those expressed for the year as a whole. For 2009’s first quarter, 29 percent of those surveyed expect sales gains (vs. 2008’s first quarter), 40 percent see sales declines and 31 percent expect no change. The percentage predicting a quarterly sales increase now is down from the 56 percent who forecast fourth-quarter, 2008 sales gains (vs. 2007’s fourth quarter) three months ago.

Sales prospects reported by the survey respondents are the lowest they have been in the years that the survey has been conducted in a like manner (since 1994’s first quarter). The lowest level of expectation expressed previously was in 2001’s fourth quarter when 39 percent predicted quarterly sales gains (vs. year-ago levels).

One-third (33 percent) of businesses see higher profits for the first quarter (vs. year-ago levels), while 47 percent predict declines. Twenty percent see no change. The percentage expecting profit increases is down from the 46 percent who forecast fourth-quarter 2008 profit gains.

The largest number of businesses surveyed (43 percent) predict first-quarter 2009 job declines for their local operations (vs. 2008’s first quarter). Twenty percent see job increases and 37 percent expect no change. The current percentage predicting employment increases reached its lowest level since 2001’s fourth quarter when only 17 percent forecast a quarterly employment gain.

A majority of manufacturers and larger employers forecast first-quarter job declines (vs. year ago levels). Fifty-two percent of manufactures predict employment decreases (vs. 38 percent among non-manufacturers) and 56 percent of larger employers forecast declines (vs. 31 percent among smaller employers).

The Business Outlook Survey, conducted by the MMAC, contains responses from 120 Milwaukee area firms, both large and small, employing more than 64,800 people. 

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