Optimism building among MMAC members

Milwaukee area businesses are generally optimistic about the second quarter of 2014, according to the Business Outlook Survey conducted by the Metropolitan Milwaukee Association of Commerce.

Seventy-two percent of businesses surveyed see sales increases in the second quarter, 57 percent expect profit increases and more than 40 percent predict job gains for the new quarter.

“Quarterly sales optimism among area businesses improved for the fourth time in the past five quarters, from a post-recession low of 49 percent in 2013’s first quarter to the current 72 percent,” said Bret Mayborne, MMAC’s economic research director. “While sales expectations are at levels expected in a solid growth environment, the levels of optimism expressed on profits and employment are a bit more tepid. Business expectations largely languished in 2013, producing levels of optimism which generally failed to excite. Business momentum has built in recent quarters, particularly regarding real sales levels, suggesting that a stronger base of growth may be building.”

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The current percentage predicting a quarterly sales increase (72 percent) is up from the 67 percent who forecast first-quarter sales gains (vs. 2013’s first quarter) three months ago and marks the first time in two years that positive quarterly sales expectations exceeded 70 percent.

Non-manufacturers are particularly optimistic on future sales levels. Seventy-five percent of non-manufacturers surveyed see improved real sales levels in 2014’s second quarter, seven percentage points higher than the level of optimism expressed by manufacturers (68 percent see sales increases).

Profit forecasts remain rather modest. Fifty-seven percent of all Milwaukee-area businesses see higher profits in the second quarter (vs. year-ago levels), up modestly from the 54 percent who forecast first quarter profit gains. Currently, only 13 percent predict profit declines while 30 percent see no change.

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The current employment situation in the metro area drew somewhat mixed results. On the one hand, local jobs have posted 41 consecutive months of year-over-year growth. Yet gains posted in 2014 to date have been uneven – a 1.5 percent gain posted in January was followed by 0.4 percent growth in February (latest available). Also, current job gains are top heavy, led largely by the education, health and government sectors. Recent declines continue in the manufacturing sector, which has posted nine consecutive months of year-over-year job declines.

Survey results suggest that employment gains are likely to continue in the near term. While the largest percentage of all businesses surveyed (46 percent) see no change in second quarter job levels for their local operations, those seeing job gains (41 percent) outnumber those expecting declines (12 percent) by more than a three-to-one margin. Second-quarter expectations are down from the 48 percent of businesses who forecast first-quarter employment gains.

Forecasts for future wage and salary increases weakened in the second quarter. On average, the change in per person employee wages and salaries is forecast to rise 2.2 percent over the next 12 months, below the 2.6 percent annualized increase predicted three months ago.

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Sales projections for 2014 as a whole are similar to expectations expressed three months ago. Currently, 74 percent of businesses surveyed see real sales gains for calendar year 2014; only 7 percent see declines, while 19 percent see no change.

The Business Outlook Survey, conducted by the MMAC, contains responses from 123 Milwaukee area firms, both large and small, employing more than 44,350 people.

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