Q3 2021: RSM MMBI posts all-time high amid robust growth, higher prices

The third-quarter Middle Market Business Index rises to 145.5

American middle market business conditions point to continued robust economic growth, rising revenues and net earnings during the third quarter and going forward over the next six months, according to the Q3 2021 RSM US Middle Market Business Index survey. The topline business conditions index increased from 133.6 in the second quarter to 145.5 in the third quarter of 2021, an all-time high in the MMBI survey’s history. However, the latest wave of U.S. COVID-19 cases, largely driven by the rise of the coronavirus delta variant, does denote a measure of risk in the otherwise encouraging outlook.

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Below is a snapshot of the MMBI Q3 2021 top findings:

Both third-quarter MMBI data and responses to the forward-looking survey questions have captured the economic boom underway in the middle market and the American economy despite higher prices and the fact that companies are passing those costs along to consumers downstream.

Pandemic pricing

The primary challenge for businesses continues to be the pricing environment as the global and domestic economies continue to grapple with supply chain constraints and shortages of goods used at earlier and intermediate stages of production. Seventy-four percent of survey respondents indicated that they paid higher prices for inputs and 76% noted that they expect to do so over the next six months. In our estimation, the window to pass price increases downstream may turn out to be brief. Inside wholesale pricing and broader inflation aggregates we can already observe moderation in price increases and, in some cases, outright declines as supply chains slowly normalize.

Additional findings:

• 64% said the broader U.S. economy improved in the current quarter
• 48% indicated they have started to rebuild inventories in contrast with 34% last quarter
• 58% of respondents indicated they increased hiring
• 67% noted they expect to increase hiring through the end of the year
• 47% said they increased capital expenditures and 59% said they intend to do so

The report also included initial findings on special questions related to the topic of environmental, social and governance efforts in the middle market.

• 41% indicated that their organizations have devised a formal plan around ESG issues
• Look for our full report on ESG in the middle market in October.