Two recent surveys of Wisconsin and Milwaukee area businesses offer a lackluster and pessimistic outlook for economic growth in the second half of 2024.
"There is no question that the mix of higher costs and higher interest rates are making employers rethink investment and hiring plans," said
Kurt Bauer, president and chief executive officer of
Wisconsin Manufacturers & Commerce. "While we may not enter into a typically defined recession, this data shows that the economy may stagnate at least through the end of the year."
WMC conducted its summer 2024 survey over the first three weeks of July. The survey included 182 responses that make up a representative sample of its membership.
In its executive summary for the results, WMC said inflation and higher interest rates are driving "sustained economic pessimism."
More than half of businesses, 53%, surveyed by Wisconsin Manufacturers & Commerce expect Wisconsin’s economy to remain flat over the next six months while 8% expect a decline. More than a third, 36%, expect moderate growth and 3% expect good growth.
The WMC survey found similar figures for the national economy.
Inflation rated as the top economic challenge facing companies at 35% followed by workforce shortages at 25% and health care costs at 16%.
The survey found 57% of businesses have seen their costs increase by more than 20% since January 2021, including 36% with a 21% to 30% increase and another 15% with increases in the 30s.
WMC also reported 44% of those surveyed had delayed or reduced the size of a project or capital expenditure due to higher interest rates. But a majority, 56%, said rates had not caused a project change or delay.
Another recent survey, this one conducted by the
Metropolitan Milwaukee Association of Commerce, found continuing economic growth and recovery was the top concern heading into the third quarter. Inflation ranked as the second highest concern, followed by supply chain issues, health care costs, labor shortages and then crime.
The MMAC survey is done on a quarterly basis and included responses from 63 companies. The organization said "businesses expressed lackluster expectations toward third quarter growth."
Two-thirds of respondents to the MMAC survey said they expect inflation to be between 3% and 5% for 2024.
The survey did find some improvements compared to the second quarter version of the MMAC survey.
Almost half of respondents, 49%, are expecting third quarter sales to be up year-over-year, compared to 44% with that view in the second quarter. Similarly, 52% expect to see a year-over-year increase in third quarter profits, up from 43% in the second quarter.
But despite the improvements, the percentage predicting an increase in sales has been less than 50% for four straight quarters, according to MMAC.
“While optimism remains low by historical standards, there has been some modest improvement in the quarter-to-quarter trend, particularly in regard to sales and profit levels,” said Bret Mayborne, vice president – economic research at MMAC. “Whether this momentum translates into stronger second-half business growth is still an open question.”
Neither the survey point to strong job growth for the rest of the year.
MMAC found 44% of employers expecting total employment to rise for the entire year while 32% predict no change and 24% expect a decline.
WMC, on the other hand, found 39% expect to increase their number of employees over the next six months while 54% expect no change and 6% predict a decline.
The MMAC survey found an expected increase in wages and salaries of 3.1% over the next 12 months.
The WMC survey found a third of employers expecting wages to increase of 3% to 3.5%. Another 37% expect increases of 3.6% or more.
