Chicago – The RSM US Middle Market Business Index (MMBI), published by RSM US LLP (“RSM”) in partnership with the U.S. Chamber of Commerce, increased to 134 in the first quarter, up 9.4 points from the previous quarter. Moderating inflation and strong household consumption underscored an increase in top-line sentiment reflecting resilient economic expansion in the US in the middle market as businesses continue to weather economic headwinds and setbacks.
RSM Chief Economist Joe Brusuelas said: US LLP. “In the last six months of last year, the economy expanded at a pace of 3%, and January’s strong consumer activity shows that the current economic expansion is far from over.”
Midmarket sentiment suggests easing, but risks remain
The improvement in the top-line index also reflects the relief companies have experienced as overall inflation continues to moderate, having peaked last June and the commodities sector is facing disinflation. represents. The easing was due to 53% of respondents in the MMBI survey showing an increase in gross income this quarter, up from 42% of him in the final quarter last year, and 49% of participants reporting an increase in net income. Emphasized. An impressive 57% of respondents said they expect both their gross revenues and net income to increase by the middle of the year.
That combination of resilience and easing has boosted business confidence to the point that firms have been stockpiling in the first quarter, and there is some risk going forward as the delayed impact of higher interest rates begins to subside. bring. More than half, or his 53% of respondents, said they had strengthened their commodity stocks, but given the decline in household oversavings, this should be monitored closely.
Neil Bradley, executive vice president, chief policy officer and strategic advocacy officer at the U.S. Chamber of Commerce, said: “Corporate earnings and earnings growth in the first quarter of 2023 and lower inflation are reported.Driving optimism in the midmarket sector. However, as household savings continue to decline, close attention should be paid to the ability of consumers to spend throughout the year and the impact of potential declines in household spending. ”
Firms experience solid demand and profit from prices received
Sentiment about the overall economy soared, with 47% of executives saying the economy improved this quarter, up from just 28% previously. 41% expect improvement in the next six months. RSM believes that the high number of respondents who indicated a general improvement in economic conditions was the result of a combination of solid demand, lower prices paid and moderately higher prices received.
About 69% of respondents said the price they paid had increased from a recent peak of 82% in the third quarter of last year. Mid-market companies have benefited from price adjustments in oil and gasoline, and disinflation in the commodity sector has also helped.
The survey results show that demand was very strong at the beginning of the year, with 55% of respondents saying they benefited from the price increases they received. About 62% of executives surveyed said they expect prices to rise in the next six months.
In addition, mid-market companies continue to prioritize capital spending, with 49% of respondents saying they increased their spending on productivity-enhancing software, equipment and intellectual property this quarter. More than half (55%) said they plan to do so by midyear.
Service sector inflation and tight labor market challenges continue
The MMBI report warns that service sector inflation has yet to peak. It was up 7.6% year-on-year through January, driven primarily by housing and housing services. Both categories are part of a complex chain of factors driving wage growth.
Both employment and compensation continue to reflect historically tight labor markets, which could dampen the outlook for robust total earnings and earnings. Of the companies surveyed, 47% increased hiring and 58% used higher compensation to attract workers in the first quarter. Looking ahead, 51% of respondents said they would hire more workers, and 63% said they would raise wages to replace the labor shortage.
The survey data that informs the readings of this index was collected from 406 respondents between January 9th and January 30th, 2023.
About the RSM US Middle Market Business Index
RSM US LLP and the American Chamber of Commerce have partnered to release the RSM US Middle Market Business Index (MMBI). This is based on a survey of mid-market companies conducted by the Harris Poll, which began in the first quarter of 2015. The survey is conducted four times a year, in the first month of each quarter (January, April, July and October). The research panel is composed of approximately 1,500 middle market executives and is designed to accurately reflect the middle market landscape.
Built in collaboration with Moody’s Analytics, the MMBI grew out of a subset of survey questions that asked respondents to report changes in various metrics. Respondents are asked a total of 20 questions, consistent with the pattern of other qualitative business surveys such as the Institute for Supply Management and the National Federation of Independent Companies.
The 20 questions relate to changes in various business metrics, including revenues, profits, capital expenditures, hiring, employee compensation, prices paid, prices received, and inventory. There are also questions about the economy and outlook, as well as credit availability and borrowing. For 10 questions, respondents are asked to report changes from the previous quarter. For the remaining 10, she is asked to state her six-month direction for these same metrics.
Responses to each question are reported as a diffusion index. The MMBI is a composite index calculated as an equal weighted sum of the diffusion indices of 10 survey questions plus 100 to ensure that the MMBI is non-negative. An MMBI number above 100 indicates a general expansion of the middle market. Anything less than 100 indicates overall shrinkage. Distance from 100 indicates strength of stretch.
About the American Chamber of Commerce
The American Chamber of Commerce is the world’s largest business organization representing businesses of all sizes in all sectors of the economy. Members range from small businesses and local chambers of commerce lining America’s main streets to major trade associations and large corporations.
They all have one thing in common. That means the American Chamber of Commerce is counting on you to speak up in Washington, across the country, and around the world. For more than 100 years, we have advocated pro-business policies that help businesses create jobs and grow the economy.
About RSM US LLP
RSM is a leading provider of professional services for the mid-market. The clients we serve are engines of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment. Our aim is to instill confidence in a world of change and enable our clients and people to reach their full potential.
RSM US LLP is a US member of RSM International, a global network of independent assurance, tax and consulting firms with 57,000 people in 120 countries. For more information, please visit rsmus.com. Like us on Facebook.twitterand/or connect with us on LinkedIn.