Milwaukee area businesses see continuing gains in business activity for their local operations, according to the latest business outlook survey conducted by the Metropolitan Milwaukee Association of Commerce (MMAC).
Expectations toward second-quarter sales, profit and job levels closely match those expressed for the first quarter of 2007 and remain at healthy levels, according to the report.
“While metro area businesses remain generally optimistic, there were some mixed signals in the second-quarter results,” said Bret Mayborne, the MMAC’s economic research director. “On the one hand, despite manufacturing’s lackluster job trend, nearly two-thirds of manufacturing companies surveyed expect year-over-year employment gains in 2007’s second quarter. Conversely, expectations on quarterly real sales levels, while healthy, have trended downward in recent surveys.”
Seventy percent of surveyed businesses see rising real sales levels for the second quarter (vs. the second quarter of 2006), down marginally from the 72 who forecast first-quarter gains. Only 5 percent see declines in second-quarter sales levels, while 25 percent expect no change.
While the percentage expecting positive future sales results remain at a healthy level, the level of optimism has trended downward in each of the past four quarters.
Smaller employers expressed a higher level of optimism than larger employers toward future sales levels. Seventy-six percent of small companies (less than 100 employees) surveyed see second-quarter sales gains (vs. year-ago levels), higher than the 65 percent of larger companies with such expectations.
Sales projections among non-manufacturers, where 74 percent see second-quarter sales gains (vs. 2006’s second quarter), were higher than the 63 percent of manufacturers who see such increases.
Profit expectations for the second quarter closely match those expressed in first quarter, with 60 percent of all businesses surveyed seeing increases in second-quarter profit levels (vs. year ago levels), vs. the 61 percent who forecast first-quarter profit gains.
Only 12 percent see declines in second-quarter profits, while 28 percent expect no change.
The employment situation in the metro area has been characterized by moderate growth in recent years. Final numbers for 2006, recently released by the Wisconsin Department of Workforce Development, indicate that overall job levels rose 0.8 percent for the year, with gains of 1 percent in the service-providing sector partially offset by a small 0.2-percent decline among goods-producers.
Survey results indicate that employers see continuing near-term job gains. Businesses forecasting second-quarter 2007 employment increases vs. year-ago levels (52 percent) outnumber those expecting job declines (10 percent) by over a five-to-one margin. The percentage seeing job increases is up modestly from the 51 percent who saw gains for the first quarter, and marks the fifth consecutive quarter in which one-half or more of businesses surveyed predicted quarterly job gains (over year-ago levels) for their local operations.
Despite manufacturing’s lagging job trend, manufacturers expressed strong confidence in future employment gains. Sixty-three percent of all manufacturers see second-quarter job increases in their local operations (vs. year-ago levels), while 22 percent predict employment declines. The remaining 16 percent see no change. Among non-manufacturers, 47 percent of such businesses see second-quarter job level increases, while only 4 percent see declines. Forty-nine percent do not expect their employment levels to change in the quarter.
A 3.3-percent increase in per employee wages and salaries is expected over the next 12 months, slightly lower than the 3.5 percent rise projected in the first quarter. The average wage and salary increase for non-manufacturers (up 3.4 percent) outweighed the 2.9-percent gain forecast by manufacturers.
Sales forecasts for the year 2007 as a whole matched those expressed at the beginning of the year. In both the first and second quarters, 78 percent of businesses surveyed expressed confidence in rising real 2007 sales levels. Currently only 8 percent project a yearly sales declines, while 14 percent see no change.
The Business Outlook Survey, conducted by the MMAC, contains responses from 105 Milwaukee area firms, large and small, employing more than 58,700 people.
