With the specter of a government shutdown and default of the national debt providing strong head winds, business confidence in future growth prospects turned downward for the fourth quarter, according to the latest Business Outlook Survey conducted by the Metropolitan Milwaukee Association of Commerce (MMAC).
While the majority of companies surveyed foresee fourth-quarter gains in sales and profits, the percentages rank lower than those posted for the third quarter.
“The results of the MMAC’s fourth-quarter survey send somewhat mixed results,” said Bret Mayborne, the MMAC’s economic research director. “After building momentum in the previous two quarters, business confidence turned downward in 2013’s fourth quarter. At the same time businesses surveyed expressed confidence that growth will continue into the 2014 calendar year.”
Those firms expecting real sales increases posted a noticeable drop in the fourth quarter optimism, down nine percentage points from third-quarter levels.
Decreasing optimism was also registered in profit and employment expectations but at a less dramatic pace. The percentage forecasting profit and employment increases for the quarter were each down four percentage points respectively from third-quarter levels.
Fifty-eight percent of all businesses surveyed see real sales gains in 2013’s fourth quarter (vs. year-ago levels). Sixteen percent predict fourth-quarter sales declines (vs. 2012’s fourth quarter), while 26 percent expect no change. The percentage forecasting quarterly sales gains (vs. year-ago levels) is down from the 67 percent who forecast third-quarter gains and follows consecutive quarters of improving optimism.
Fourth-quarter sales expectations differ somewhat by firm size. Large firms are more likely to predict real sales gains than small companies. Sixty-three percent of large companies (100 or more employees) surveyed see fourth-quarter sales gains (vs. 2012’s fourth quarter) compared with 54 percent among small firms.
Lower profit expectations also were registered. Fifty-six percent of all surveyed businesses predict fourth-quarter profit gains (vs. 2012’s fourth quarter), four percentage points lower than the 60 percent who saw third-quarter increases (vs. year-ago levels). Currently, 18 percent see profit declines in 2013’s fourth-quarter and 26 percent see no change.
The job situation in the metro area has improved in recent months. Over the June-to-August period (latest available three month period) the pace of year-over-year job growth was more than double that posted in the previous three month period. Further, on an industry level, employment growth has broadened with seven of ten major industry sectors recording year-over-year employment growth through 2013’s first eight months.
Survey results suggest a rather tepid job market going forward. The largest number of those surveyed see fourth-quarter job levels holding steady (42 percent), but companies seeing fourth-quarter job increases still outnumbering those expecting declines by nearly a two-to-one margin (38 percent see job increases, 20 percent declines).
Like sales and profit expectations, the current percentage forecasting employment gains ranks below third-quarter levels when 42 percent saw job increases.
A modest upward trend has been registered in wage and salary growth. Employers project an average annual increase of 2.3 percent in per employee wages and salaries over the next 12 months.
Metro area businesses gave their first look at expectations for the 2014 calendar year in this survey. Sixty-eight percent of metro area businesses see real sales gains in 2014 (vs. 2013), while only 6 percent project declines. The remaining 26 percent see no change.
Expectations for 2014 rank higher than the initial forecast for 2013. Twelve months ago, 65 percent of survey respondents forecast sales gains for the forthcoming calendar year (2013).
The Business Outlook Survey contains responses from 131 Milwaukee-area firms, both large and small, employing more than 54,100 people.
