Optimism among local CEOs wanes, but still strong

Regardless of widespread predictions of a recession, the majority of employers in the Milwaukee area expect robust business in 2008, according to the newest Business Outlook Survey by the Metropolitan Milwaukee Association of Commerce (MMAC), as first reported by Small Business Times.

Sixty-nine percent of businesses surveyed see sales increases in 2008, while 61 percent predict profit gains and 52 percent expect employment growth for their local operations.

“Despite talk of a national economic recession, the majority of metro area businesses surveyed expect continuing business gains in 2008,” said Bret Mayborne, the MMAC’s economic research director. “Nonetheless, expectations have waned over time, suggesting that growth in local business activity may not be as robust as it has been in recent years.”

Among Milwaukee area businesses, 69 percent of those surveyed expect increases in real sales levels in 2008. Ten percent predict sales declines, while the remaining 21 percent see no change. The proportion predicting 2008 sales growth is down from the 78 percent who opened calendar year 2007 by predicting sales increases for the year as a whole.

While manufacturing indicators performed poorly in 2007, manufacturers registered optimism toward the New Year. Eighty percent of manufacturers surveyed predict real sales growth in 2008, vs. 63 percent among non-manufacturers. By company size, larger employers (100 or more employees) are more likely to forecast 2008 sales gains than smaller employers (75 percent vs. 62 percent, respectively).

Profit expectations are slightly lower now than one year ago. Sixty-one percent of all employers surveyed forecast higher profits in 2008 (vs. 2007), down from the 65 percent who forecast profit gains at the beginning of 2007.

Currently, manufacturers are more likely to predict an improving profit picture than non-manufacturers. Sixty-eight percent of surveyed manufacturers expect profit gains in 2008 vs. 58 percent among non-manufacturers.

Regarding capital spending plans, 38 percent of all companies surveyed forecast a rise in capital expenditures for the year. Nineteen percent see capital spending declines and 43 percent expect no change. The percentage predicting increases is down from the 46 percent who opened 2007 expecting capital spending gains.

Job gains continued in 2007 with year-over-year gains posted in 43 consecutive months as of December (latest available). For 2007, employment growth averaged 1.2 percent with survey results suggesting that gains are likely to continue well into 2008. Fifty-two percent of all those surveyed expect increases in their local workforces in 2008, outnumbering those predicting declines (10 percent) by over a 5-to-1 margin. Thirty-eight percent see no change.

Employment expectations are similar among manufacturers and non-manufacturers. Fifty-two percent of manufacturers predict job increases during calendar year 2008, while 51 percent of non-manufacturers see employment gains.

Wage and salary expectations have moderated over the past year. Over the next 12 months, the average change in per person employee wages and salaries is forecast to rise 3.1 percent, matching the 3.1 percent annualized increase predicted in 2007’s fourth quarter, but down from the 3.5 percent rise forecast one year ago.

Despite rising inflationary pressures in recent months, local businesses see moderate price increases for 2008. Fifteen percent of all companies surveyed see inflation falling in the 0 to 2 percent range, while the vast majority (81 percent) expect price increases of 3 to 5 percent. Only 4 percent predict price gains of 6 percent or higher.

Quarterly business expectations toward future sales levels have tracked downward in recent quarters. For 2008’s first quarter, 62 percent of those surveyed expect sales gains (vs. 2007’s first quarter), 13 percent see sales declines, and 25 percent expect no change. The percentage predicting a quarterly sales increase now is down from the 68 percent who forecast fourth-quarter sales gains (vs. 2006’s fourth quarter) three months ago. Quarterly sales forecasts have fallen in six of the past seven quarters.

Regarding profits, 55 percent of businesses see higher profits for the first quarter (vs. year-ago levels), while 14 percent predict declines. Thirty-one percent see no change. The percentage expecting profit increases is down modestly from the 59 percent who forecast fourth-quarter 2007 profit gains, and marks the lowest level of profit optimism expressed in over four years (since 2003’s fourth quarter).

Among all businesses surveyed, 46 percent predict first-quarter job gains for their local operations (vs. 2007’s first quarter) vs. the 14 percent predicting job declines. The remaining 40 percent see no change. The percentage predicting employment increases fell for the second consecutive quarter but remains at a level that overall job gains would be expected for the metro area.

By industry, 48 percent of manufacturers see employment increases in 2008’s first-quarter (over year-ago levels) vs. 45 percent among non-manufacturers surveyed. Smaller and larger employers are equally optimistic toward quarterly employment gains with 46 percent of each predicting first-quarter job increases (over year-ago levels).

The Business Outlook Survey, conducted by the MMAC, contains responses from 124 Milwaukee area firms, both large and small, employing more than 72,800 people.

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