Milwaukee-area businesses see continued growth in 2012, according to the new Business Outlook Survey conducted by the Metropolitan Milwaukee Association of Commerce (MMAC).
Seventy-three percent of businesses surveyed see sales increases in 2012, 68 percent forecast profit gains and over half expect job growth in the calendar year.
Milwaukee’s economy posted solid gains in 2011 across a number of local indicators in its first full year of economic recovery from the Great Recession.
The results from this survey suggest that metro area businesses see more of the same in 2012. The key to success for the new year will be whether this growth can be sustained at a pace that will substantially cut into the unemployment rate.”
At present the metro area is only one and one-half years into its economic recovery. The magic elixir to getting back to pre-recession levels is strong and sustained growth. The Milwaukee area lost approximately 50,000 jobs during the recession and recovered an estimated 18,000 in 2011.
Thus, nearly two more years of similar job gains are necessary to get employment levels back to pre-recession averages.
While survey results suggest that growth will continue into 2012, there is a question of how strong growth will be. Metro area employment gains slowed significantly in 2011’s final months, giving some pause as to whether growth in early 2012 will be strong enough to deliver an improving unemployment picture.
If the local area is to achieve strong gains in 2012, it will likely have to do so with manufacturing as a foundation. Manufacturing growth in 2011 was substantial and survey results indicate strong optimism among manufacturers towards sales, profits and employment in 2012.
Optimism toward 2012 closely matches expectations expressed one year ago toward calendar year 2011. Nearly three-quarters (73 percent) of businesses surveyed forecast higher real sales levels in 2012 – only slightly lower than the 76 percent who predicted annual gains at the beginning of 2011.
Currently only 9 percent of those surveyed predict 2012 sales declines, while 18 percent see no change.
Manufacturers are more likely to see 2012 sales gains than non-manufacturers. Eighty-three percent of manufacturers see sales increases for the new year, while only 2 percent see decreased sales levels. Conversely, two-thirds (66 percent) of non-manufacturers predict sales gains while 14 percent expect declines. Expectations were more balanced by firm size. Seventy-four percent of small employers (less than 100 employees) see 2012 sales gains vs. 72 percent among large employers.
A healthy profit picture is also forecast by metro area businesses. Sixty-eight percent of all employers surveyed see profit level increases in 2012. Thirteen percent see profit declines for the year and 19 percent expect no change. Those expecting profit growth in 2012 closely match the 67 percent who forecast 2011 profit gains one year ago.
Regarding capital spending plans, 44 percent of companies surveyed forecast a rise in capital expenditures for the year. Seventeen percent see capital spending declines and 39 percent expect no change. The percentage currently predicting increases is down modestly from the 46 percent who opened 2011 expecting capital spending gains.
Consistent job gains were re-established in 2011 in the metro area, with employment rising vs. year-ago levels for 17 consecutive months through November, 2011 (latest available). Over the past 12 months the metro area has posted a net addition of 5,500 jobs. Survey results suggest that increases are likely to continue into 2012. Fifty-four percent of all businesses surveyed expect job gains in their local workforces in 2012, outnumbering those predicting declines (10 percent) by over a five-to-one margin. Thirty-six percent see no change.
The trend within the manufacturing sector was particularly strong. Seventy-four percent of manufacturers predict job growth in calendar year 2012. Remarkably, none (0 percent) of the manufacturers surveyed see employment decreases in the coming year. For non-manufacturers, 41 percent predict job growth while 16 percent see declines.
Despite the healthy job forecast, wage and salary increases are expected to remain moderate. Presently the average change in per person employee wages and salaries is forecast to rise 2.2 percent over the next 12 months, down from the 2.4 percent annualized increase predicted three months ago but matching the rise forecast at the beginning of 2011.
Inflationary pressures will largely be held in check for 2012. Thirty-five percent of companies surveyed see inflation falling in the 0 percent to 2 percent range while the largest percentage (61 percent) expect price increases of 3 percent to 5 percent. Only 4 percent see price gains of 6 percent or higher.
Sales expectations for 2012’s first quarter rebounded from 2011’s final quarter. Seventy-two percent of those surveyed expect first-quarter sales gains (vs. 2011’s first quarter), 13 percent see sales declines, and 16 percent expect no change. The current percentage predicting a quarterly sales increase is up from the 64 percent who forecast fourth-quarter, 2011 sales gains (vs. 2010’s fourth quarter) three months ago.
Profit optimism rose modestly in 2012’s first quarter. Sixty-three percent of Milwaukee area businesses see higher profits for the quarter (vs. year-ago levels), up from the 59 percent who forecast fourth-quarter, 2011 profit gains. Currently only 16 percent predict profit declines while 22 percent see no change.
Quarterly employment expectations have slipped slightly in each of the past two quarters. Forty-nine percent of all businesses surveyed predict first-quarter, 2012 job gains for their local operations (vs. 2011’s first quarter), down from the 57 percent and 53 percent of companies which forecast year-over-year gains in 2011’s third and fourth quarters respectively. Nonetheless companies are still over four times more likely to forecast employment gains for 2012’s first quarter than declines (12 percent). Thirty-nine percent see no change.
Manufacturers expressed the greatest likelihood of expanding job levels. Sixty-seven percent of manufacturers surveyed expect higher employment totals in 2012’s first quarter (vs. one-year ago), higher than the 38 percent of non-manufacturers who expect such gains.
The Business Outlook Survey, conducted by the MMAC, contains responses from 134 Milwaukee area firms, both large and small, employing more than 58,800 people.