MMAC employers are optimistic about 2011

Solid optimism was expressed by Milwaukee-area businesses both for 2011 as a whole and for the year’s first quarter, according to the latest Business Outlook Survey conducted by the Metropolitan Milwaukee Association of Commerce (MMAC).

Seventy-six percent of businesses surveyed foresee sales increases for their companies in 2011, and more than half expect job gains for the calendar year.

“For the first time since the recession, Milwaukee area businesses expressed a healthy level of optimism toward future growth prospects,” said Bret Mayborne, MMAC’s economic research director. “Expectations for 2011 are more typical of what would be forecast during a normal growth environment. This is in contrast to the mostly tepid expectations expressed over the course of 2010. The local economic recovery may finally be on track after floundering for more than one year. Of note in the survey results is the strong optimism expressed by manufacturers, particularly toward future job levels.”

Seventy-six percent of surveyed companies see real sales increases in 2011 – 20 percentage points higher than the 56 percent who predicted 2010 sales gains one year ago. Currently only 6 percent of those surveyed predict 2011 sales declines while 17 percent see no change.

By industry, manufacturers are more optimistic than non-manufacturers on 2011 sale prospects. Eighty-one percent of manufacturers see sales increases for the New Year, while only 4 percent see decreased sales levels.

Among non-manufacturers, 73 percent predict sales gains while 8 percent expect declines.

Smaller firms are somewhat more confident toward 2011 sales gains than large companies (100 or more employees). Seventy-nine percent of small firms forecast 2011 sales gains vs. 72 percent among large employers.

An improving profit picture is forecast for Milwaukee area businesses. Sixty-seven percent of all employers surveyed see profit level increases in 2011. Ten percent see profit declines for the year and 23 percent expect no change. Those expecting profit growth in 2011 represent an improvement over the 56 percent who forecast 2010 profit gains one year ago.

Gains have been posted in capital spending plans for area companies. Forty-six percent of all companies surveyed forecast a rise in capital expenditures for the year, higher than the 8 percent who expect capital spending declines. Forty-six percent expect no change. The percentage predicting increases currently is up from the 30 percent who opened 2010 expecting capital spending gains.

More jobs

Through November, 2010 (latest available) employment in the Milwaukee area has fallen for 31 consecutive months on a year-over-year basis. But the rate of job decline has grown smaller in nine of 2010’s first 11 months, from a 4.6-percent drop in January to November’s 0.6-percent fall.

Results of the business outlook survey suggest that job increases are likely to resume in 2011. More than half (51 percent) of all those surveyed expect job increases in 2011, while only 9 percent predicting employment decreases. Forty percent see no change.

Manufacturers were particularly optimistic with a robust 57 percent predicting job growth in 2011 and only 6 percent seeing declines. This compares to the 47 percent of non-manufacturers who predict job growth.

By employment size, job expectations are fairly balanced. Small employers – with 52 percent seeing 2011 gains – are only slightly more likely to predict employment growth than large employers – where 49 percent see gains.

Wage and salary expectations have risen in recent quarters but remain moderate in size.

Presently the average change in per person employee wages and salaries is forecast to rise 2.2 percent over the next 12 months, above the 1.7 percent annualized increase predicted three months ago and the 1.3-percent rise forecast at the beginning of 2010.

Price inflation nationally in November (up 1.1 percent from year-ago levels) is less than half of what it was at the beginning of 2010 (up 2.6 percent in January). Little inflationary pressure is expected in 2011. Nearly half (46 percent) of all companies surveyed see inflation falling in the 0 to 2 percent range for 2011, while 47 percent expect price increases of 3 to 5 percent. Only 6 percent predict price gains of 6 percent or higher.

First quarter expectations

Current survey results mark a significant upturn in optimism over previous quarters. Seventy-one percent of those surveyed expect first-quarter sales gains (vs. 2010’s first quarter), 8 percent see sales declines, and 22 percent expect no change.

The current percentage predicting a quarterly sales increase is up from the 59 percent who forecast fourth-quarter, 2010 sales gains (vs. 2009’s fourth quarter) three months ago and marks the first time in 14 quarterly surveys that sales optimism (firms expecting sales increases) has exceeded 70 percent.

Profit forecasts are also on the rise. Sixty-two percent of Milwaukee area businesses see higher profits in 2011’s first quarter (vs. year-ago levels), up from the 56 percent who forecast fourth-quarter, 2010 profit gains. Currently only 10 percent predict profit declines while 28 percent see no change.

Companies are over four times more likely to forecast employment gains for 2011’s first quarter than declines. Fifty-one percent of all businesses surveyed predict first-quarter job gains for their local operations (vs. 2010’s first quarter), vs. the 12 percent predicting job declines. The remaining 38 percent see no change. The percentage forecasting first-quarter gains is up from the 34 percent who three months ago forecast fourth-quarter 2010 job increases (vs. year-ago levels).

Manufacturers expressed the greatest likelihood of expanding job levels. Sixty-three percent of manufacturers survey expect higher employment totals in 2011’s first quarter (vs. one-year ago), 20 percentage points higher than expectations for non-manufacturers (where 43 percent expect quarterly job gains).

The Business Outlook Survey, conducted by the MMAC, contains responses from 144 Milwaukee area firms, both large and small, employing more than 64,400 people.

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