Milwaukee-area businesses see economic recovery in 2010, according to a Business Outlook Survey conducted by the Metropolitan Milwaukee Association of Commerce (MMAC).
More than half of businesses surveyed see sales and profit increases in 2010, while companies predicting job gains for the calendar year outnumber those seeing declines. There is an expectation among area businesses that economic activity in the metro area is gathering momentum, Prospects for 2010 are certainly higher than those expressed one year-ago (for 2009) and quarterly predictions, while still modest, have improved in each of the past three quarterly outlook surveys.
The latest survey indicates that most believe the second half of 2010 will be more robust than the first half.
While some sort of economy recovery is likely in 2010, it is difficult to gauge its potential strength. It is true that growth predictions for 2010 improved from those made one year ago, but the overall levels of optimism are tepid by historical standards. A full-fledged recovery may take some time to gain traction. Results for the 2010’s first quarter were weaker than those for the calendar year as a whole suggesting that a stronger local economic environment is more likely in the year’s second half than its first.
Expectations are significantly more optimistic toward 2010 now than they were towards 2009 one year ago. A larger percentage of surveyed companies see real sales increases in 2010 (56 percent) than sales decreases (17 percent). Twenty-seven percent see no change. This is a reversal from expectations expressed at the beginning of 2009, when only 32 percent saw gains for the coming year trailing the 42 percent who forecast declines.
Large employers (100 or more employees) are somewhat more optimistic than small employers on 2010 sale levels. Sixty-one percent of large employers see sales increases for the New Year, while 17 percent see decreased sales levels. Among small employers, 53 percent predict sales gains while 17 percent expect declines.
Fifty-six percent of all employers surveyed forecast profit level increases in 2010 (vs. 2009). Nineteen percent see profit declines for the year, while 25 percent expect no change. Those expecting profit increases in the coming year represent a significantly larger percentage than the 32 percent who forecast profit gains one year ago (for 2009).
Area companies are moderately pessimistic toward capital spending plans for 2010. Thirty percent of all companies surveyed forecast a rise in capital expenditures for the year, outnumbered by the 33 percent who expect capital spending declines. Thirty-seven percent expect no change. Nonetheless, the percentage predicting increases currently is up from the 18 percent who opened 2009 expecting capital spending gains.
There are some signs that the metro area’s employment situation may have bottomed out in 2009’s final quarter. Nonfarm employment declines have slowed a bit in recent months (through November) as did growth in the ranks of the unemployed. Survey results suggest that job increases may resume sometime in 2010. Thirty-seven percent of all those surveyed expect job increases in 2010, outnumbering those predicting employment decreases (18%) by over a two-to-one margin. The largest percentage (45 percent) see no change.
Large employers and non-manufacturers are most likely to see employment gains in the coming year. Forty-one percent of large employers predict job growth in 2010, while 40 percent of non-manufacturers forecast employment gains. In both cases those expecting increases outnumber those seeing job declines by a significant margin.
Wage and salary expectations are likely to remain low in 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 1.3 percent, matching the annualized increase (1.3 percent) predicted in 2009’s fourth quarter.
Inflationary concerns among businesses are limited under the sluggishness of the current economic environment. Over half (55 percent) of all companies surveyed see inflation falling in the 0 percent to 2 percent range for 2010, while 40 percent expect price increases of 3 percent to 5 percent. Only 5 percent predict price gains of 6 percent or higher.
The Business Outlook Survey, conducted by the MMAC, contains responses from 141 Milwaukee area firms, both large and small, employing more than 75,100 people.