Second-quarter results leave TEC members optimistic
By Harry S. Dennis III, for SBT
In my April column, I reported the first-quarter results of an economic survey to more than 5,000 chief executive TEC members in the United States, 500 of whom are located in Wisconsin. The recently completed index for the second quarter is the subject of this month’s column.
Only 30% of the TEC sample believes that the economy has improved over the past 12 months. About a third think it has actually worsened. Looking forward, the picture is much more optimistic, with 70% expecting it to be better.
Correspondingly, about half the group (nationwide and in Wisconsin) expect to hire more employees and increase their investment in fixed assets. Interestingly, only 30% of those surveyed during the first quarter expected to see staffing increases or fixed asset investment, or both.
Eighty percent of those surveyed in the second quarter expect to see sales increases over the next 12 months, and two-thirds project higher profitability as well. Compared to the first quarter survey results pertaining to sales expectations, as we look ahead, the mood is clearly more upbeat in the second quarter.
Regarding the US dollar, 80% of both the nationwide and Wisconsin groups see the dollar remaining about the same or becoming weaker over the next 12 months. Curiously, about half of each sample believes that the dollar is at a level that will stimulate an increase in exports. However, the other half does not see a positive effect on the current trade imbalance.
With respect to personal investment choices, stocks and real estate are in, say members in our TEC sample, and bonds are out. The outlook about recent deflationary pressures is mixed: 25% are concerned about it, a third isn’t sure, and a fewer than half of the respondents are not concerned at all.
Regarding the president’s handling of the post- war reconstruction of Iraq, about 70% indicate he is doing a fair to good job. And speaking of President Bush, 80% believe that the economy will be the most critical issue in next year’s election. Specifically, the two greatest concerns supporting this opinion are the lack of consumer confidence and the threat of another terrorist attack.
Regarding actions that could have the most positive economic impact on the US economy, there is no clear consensus. One-third think capturing Osama bin Laden would have the greatest impact, and another third believe it’s more tax cuts. Only 10% see another cut in interest rates as a high-impact action.
SARS has resulted in 14% of the survey group halting all travel to the Asia Pacific, but only 3% have reduced their business activities with their Asian Pacific counterparts. Eighty percent report no SARS impact on their business.
Two thirds of the TEC respondents report no change in their concerns about terrorism following the Iraq war; and about half the group believes that North Korea presents the most danger to the US. Iran and Saudi Arabia are a distant second and third. These two countries were not mentioned as a threat in the first-quarter survey.
In conclusion, I’m sensing that the doleful woes associated with these stormy, uncertain, economic clouds are beginning to break up. A number of TEC companies are reporting that projects that were indefinitely on hold are back on track. The China factor is a continued threat to be sure, and it is becoming evident to me that some manufacturing segments may never recover.
But the fact remains that this past May recorded the first month-to-month increase in Wisconsin factory employment since September 2002; and Wisconsin remains the 10th-largest manufacturing employer in the nation. Indeed, the trend appears positive.
A footnote, if you will. Brian Beaulieou, a well-known national TEC economic resource I have quoted in past columns, was back in Milwaukee the other day. He concurs with most of the above conclusions from the TEC member survey.
According to his firm’s data, the economy may experience another "soft landing" in 2005-2006. But more specifically, the two indices to watch are interest rates and inventory levels. If they rise unexpectedly, then the soft landing may turn hard. Beaulieu and colleagues do not actually see another genuine recession until 2009-2010.
Finally, he points out that from an employment viewpoint, Wisconsin is comparatively strong. It is noteworthy that since 1990, Wisconsin’s unemployment rates have lagged behind that of the US economy in general. By 2004, he is looking for rates here in the 3.5% to 4% range.
Until next month, good business recovery results for your firm and for all businesses in our great state!
Harry S. Dennis III is the president of TEC (The Executive Committee) in Wisconsin and Michigan. TEC is a professional development group for CEOs, presidents and business owners. He can be reached at 262-821-3340.
July 11, 2003 Small Business Times, Milwaukee