The latest business outlook survey from the Metropolitan Milwaukee Association of Commerce points to many companies expecting a slower start to 2023 but continued optimism for sales and profit growth for the year.
“Expectations in this survey are a bit of a mixed bag. In the short run expectations for the first quarter are notably down from previous quarters, suggesting an early economic slowdown,” said Bret Mayborne, the MMAC’s economic research vice president. “On the other hand, expectations for 2023 as a whole remain at healthy levels indicating long-term growth for the full year.”
The MMAC survey, which included 73 Milwaukee area firms, showed 59% of businesses expecting a rise in sales for the first quarter compared to the same time in 2022. Another 23% expected no change and 18% are forecasting a decline.
However, manufacturing respondents were much more pessimistic with 35% projecting a decrease in sales, 30% expecting no change and 35% forecasting growth.
The outlook for profits was generally worse across all respondents with 52% expecting an increase, 26% forecasting no change and 22% projecting a decline.
Respondents were more uniform across industry and company size, but manufactures were again more pessimistic than non-manufacturers.
The outlook for the full year, however, offered more optimism with 70% of respondents expecting an increase in sales from 2022 to 2023 after accounting for inflation. Another 16% forecast no change in sales and 14% are forecasting a decline. The responses were generally uniform across size and industry, although large firms were a little less optimistic.
Optimism was down from the same time last year when 80% expected an increase in sales.
On profits, respondents were again more optimistic about the full year with 63% expecting an increase for all of 2023. However, that figure was also down from the first quarter of 2022 when 69% expected a profit increase for the year.
The outlook for capital expenditures is also worse to start 2023 than it was in early 2022. In the 2022 survey, MMAC found 48% of respondents expecting to increase their capital expenditures, a figure that dropped to 37% in the most recent survey.
The current survey also found 18% of respondents planning to decrease capital spending this year, up from 7% with that view in 2022.
Even after a year that saw inflation reach more than 8% and repeated interest rate increases by the Federal Research, the survey found inflation expectations at roughly the same level
A majority of respondents, 53%, expect inflation for all of 2023 to be 3% to 5%. At the start of 2022, 51% expected inflation would be in the 3% to 5% range.
The hiring outlook is slightly worse to start the year with 53% expecting to increase total employment this year, down from 66% at the start of 2022.
MMAC found 42% of respondents expecting no change in their total employment and 6% planning a decrease. In 2022, those figures were 32% and 2% respectively.
Large firms and manufacturers were more likely to forecast a decrease in employment. Among respondents with more than 100 employees, 11% said they plan to decrease staff and 14% of manufacturers plan to cut positions.