Business expectations for the third quarter improved modestly for southeastern Wisconsin companies in the latest Metropolitan Milwaukee Association of Commerce (MMAC) Business Outlook Survey.
“At this point Milwaukee area businesses remain skeptical towards the prospects of a significant near-term economic upturn,” said Bret Mayborne, the MMAC’s economic research director. “But the quarter’s modest improvements suggest that expectations may have bottomed out in the past three months and that more notable gains may be on the near-term horizon.”
Mayborne expressed cautious optimism about the remainder of 2009.
“There are hints in the survey results that the worst of the economic downturn may be over but we are still quite a distance from being out of the economic woods,” he said. “Consumers still lack confidence resulting from depressed job and income prospects, declining asset bases and rapid government policy changes with uncertain consequences. This uncertainty is reflected in how businesses view future economic prospects.”
Twenty-eight percent of all businesses surveyed see real sales gains in the third quarter (vs year-ago levels), up from the 22 percent who forecast second-quarter sales increases. Nonetheless, businesses are twice as likely to see third-quarter sales declines as increases, with 56 percent of those surveyed predicting falling real sales levels for the third quarter (vs. 2008’s third quarter).
Thirty-eight percent of non-manufacturers see third-quarter sales gains (vs. 2008’s third quarter), while only 13 percent of manufacturers see such increases. Nearly two-thirds (73 percent) of manufacturers expect sales declines in 2009’s third quarter. By employment size, 31 percent of large companies (100 or more employees) surveyed see third-quarter sales gains vs. 26 percent among small companies.
Job totals in the metro area have fallen in each of the past 13 months on a year-over-year basis and over 2009’s first five months the rate of job decline has averaged 4.2 percent. This employment trend is unlikely to improve much over 2009’s third quarter, Mayborne said.
Employers expecting job declines outnumber those projecting increases by more than a three-to-one margin. Over one-half of those surveyed (53 percent) see third-quarter job declines (vs. year-ago levels), while only 17 percent expect increases. The current percentage forecasting employment gains ranks slightly higher than the 14 percent who forecasted second-quarter job increases.
Third-quarter profit gains are forecast by 26 percent of those businesses surveyed, modestly higher than the 22 percent who saw second-quarter increases (vs. year-ago levels). Over one-half (57 percent) see profit declines in 2009’s third-quarter and 16% see no change.
Currently, the largest number of businesses (60 percent) expect sales declines for the year as a whole, while 16 percent predict no change.
Other findings in the latest survey
- Twenty percent of employers surveyed forecast employment increases in 2009 for their local operations, down from the 26 percent who predicted job gains at the start of 2009.
- Capital spending plans for 2009 improved somewhat from plans expressed six months ago. Twenty-four percent of employers surveyed see increased capital spending for the year, up from the 18 percent who saw such gains at the beginning of 2009. Currently, 61 percent expect capital spending declines for the year, while 15 percent see no change.
- Inflation expectations among area businesses continue to ratchet downward. The majority of those surveyed (54 percent) see price inflation of 2 percent or less in 2009, while an additional 45 percent predict moderate levels of price inflation (between 3 and 5 percent). Only 1 percent of those surveyed see inflation of 6 percent or higher.
- Wage and salary expectations give little fuel to near-term price inflation trends. Employers project an average annual increase of 0.2 percent in per employee wages and salaries over the next 12 months, with the median response forecasting no change in average wage and salary levels.
The Business Outlook Survey, conducted by the MMAC, contains responses from 143 Milwaukee area firms, both large and small, employing more than 61,000 people.