The data, which has been seasonally adjusted, is based on responses from 404 senior executives at middle market firms in a survey conducted by The Harris Poll from Oct. 1 to Oct. 22, 2024, before the presidential election on Nov. 5.
Key takeaways
The RSM US MMBI advanced in Q4 to 131.8 from 130.4 in the prior period.
The Q4 MMBI reflects robust business conditions driven by strong household spending, solid fixed business investment and a supply-side tailwind.
Nearly two-thirds of executives surveyed said they expected a general improvement in the economy over the next six months.
The Middle Market Business Index is created in partnership with the U.S. Chamber of Commerce.
The RSM US Middle Market Business Index advanced in the fourth quarter to 131.8 from 130.4, reflecting robust business conditions driven by strong household spending, solid fixed business investment and a supply-side tailwind.
We anticipate a move higher in the top-line index in the first two quarters of next year as firms recalibrate expectations based on a lighter regulatory framework and an expansionary fiscal policy, including tax cuts and higher government spending.
The outlook on the economy improved modestly in the fourth quarter, with 44% of executives who responded noting an improvement and 29% saying it remained the same. Nearly two-thirds of executives, or 62%, said they expected a general improvement in the economy over the next six months.
This comports well with an economy that has grown at just under a 3% pace over the past two years and is poised to grow at or near a 2.5% rate next year amid full employment and inflation that has eased to just above 2%.
The outlook on gross revenues and net earnings remained solid. Half of the survey’s respondents indicated gross revenues improved, and 68% said they expected further improvement during the first six months of next year.
Executives said net earnings were more modest in the fourth quarter, with 45% reporting improvement and 23% noting they had remained the same. Sixty-two percent said they anticipated improvement over the next 180 days.
With tax cuts and reduced regulatory risks just over the horizon, estimations of net earnings and gross revenues will likely improve notably from already solid levels.
The outlook on productivity-enhancing capital expenditures remained solid, with 44% of respondents reporting an increase in outlays on software, equipment and intellectual property, and 55% saying they intended to increase spending on those items.
With changes to the tax code on business fixed investment likely to be introduced next year, we are optimistic that outlays on capital expenditures may indeed improve.
Middle market businesses continue to demonstrate remarkable resilience and adaptability, driving robust growth as we close out the year. The U.S. Chamber is counting on our newly elected officials to match that optimism with policies that will support and accelerate economic growth over the next decade.
Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce
With the economy at full employment, firms will want to slow the pace of hiring as the mismatch between workers’ skills and employers’ needs, as well as workers’ availability, still predominates when it comes to hiring.
It makes sense that only 40% of firms said they had increased hiring. While 56% of survey respondents indicated they intended to increase the pace of hiring, that will be difficult given the ongoing shortage of workers.
With the labor market remaining tight and a continued premium on skilled workers, it is of little surprise that 54% of survey participants reported increasing compensation and 64% indicated they expected to do so in the new year.
On the pricing front, 68% of executives said they had paid more for goods and services and 71% said they expected to do so over the next six months. For this reason, anxiety over a rising cost of doing business remains part of the baseline narrative within our survey.
In addition, cost-of-living anxieties among consumers have made it more difficult for businesses to pass through higher costs, which only 51% of respondents reported doing.
Special Report
The RSM Middle Market Sustainability Survey 2024: US and Canada
Numerous regulations are making sustainability a larger compliance issue.
Tax incentives are one part of companies’ broader decarbonization efforts.
Training is the most common action taken toward compliance, but also the top hurdle.
The takeaway
Middle market business conditions remain stout and are almost certain to improve amid expectations of lower taxes, reduced regulation and a strong economy.
To be sure, firms with exposure to global supply chains that may face higher import taxes and other trade barriers, could dampen middle market business sentiment on the margin.
For now, though, those risks will most likely take a back seat to strong economic growth and a business-friendly environment that will provide the narrative around business conditions over the next four years.
RSM contributors
General economy
Gross revenues
Net earnings performance
Capital expenditures
Overall hiring
Employee compensation
Access to credit
Planned borrowing
Amount paid for goods
Amount received for goods
Inventory levels
To refer to the percentages in the subindex items, access the PDF.
Regulatory compliance is becoming increasingly complex.
Retail trade executive
Increasing need to keep up with technology and digitalization.
Finance executive
Global disruptions, shortages and delays affect production timelines and inventory management.
Manufacturing executive
Implementing artificial intelligence has been challenging.
Health care executive
Rising operational costs are squeezing our margins.
Wholesale trade executive
Frequent inaccuracies in order picking and processing contribute to a high rate of returns and exchanges, increasing operational costs and affecting customer trust.
Educational services executive
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ABOUT THE RSM US MIDDLE MARKET BUSINESS INDEX
In partnership with the U.S. Chamber of Commerce, we've collected data on middle market firms since 2015 through quarterly surveys conducted by The Harris Poll.
The RSM US Middle Market Business Index provides a leading measure on the performance of businesses that make up the heart and soul of our country's economy.
Middle market organizations, which make up the real economy, are too big to be small and too small to be big. They are the backbone of the broader economy, yet they often fly under the public radar. They have distinct challenges and opportunities around financing, material resources, labor, technology, innovation, regulation and other issues. The MMBI breaks new ground by capturing the distinct sentiment of this important subset of the U.S. economy.
RSM US LLP and The Harris Poll have collected data on middle market firms from a quarterly survey that 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 Middle Market Leadership Council, our survey panel, consists of approximately 1,600 middle market executives, and is designed to accurately reflect conditions in the middle market. The data is weighted to ensure that it corresponds to U.S. Census Bureau data on the basis of industry representation.
An index reading above 100 indicates that the middle market is generally expanding; a reading below 100 shows that the middle market is generally contracting. The distance from 100 is indicative of the strength of the expansion or contraction.
The MMBI survey is conducted four times a year. It is based on a subset of questions that ask middle market executives to report the change in a variety of indicators ranging from their organizations’ earnings to hiring levels and prices paid for goods and services.
The MMBI is a composite index computed as an equal weighted sum of the diffusion indexes for 10 survey questions plus 100 to keep results from becoming negative. The index is designed to capture views on both current and future conditions; it includes five questions on middle market executives' recent experiences and five on their expectations for the future.
The survey panel, the MMBI Leadership Council, consists of approximately 1,600 middle market executives across a broad array of industries, and is designed to accurately reflect conditions in the middle market.
RSM US LLP and The Harris Poll have collected data on middle market organizations using quarterly surveys that began in the first quarter of 2015. The MMBI survey is typically conducted four times a year, in the first month of each calendar quarter: January, April, July and October.
- What are your expectations regarding the general economy?
- What are your expectations regarding your organization’s gross revenues?
- How would you describe the level of your organization’s most recent quarter net earnings results?
- What are your expectations regarding your organization’s aggregate capital expenditures or investments?
- What are your expectations regarding your organization’s overall hiring levels?
- How would you describe your organization’s current employee compensation level on average?
- How would you describe current access to credit?
- What are your expectations regarding your organization’s planned borrowing?
- How would you describe the current general level of prices received?
- What are your expectations regarding your organization’s planned inventory levels?
With a backlog of research for nearly 10 years, each question in the MMBI index is now seasonally adjusted using the Census X-13 method in order to remove periodic fluctuations associated with recurring calendar-related events. Seasonally adjusted values for questions make it easier to observe underlying fundamental changes, particularly those associated with economic expansions and contractions.
For this adjustment, the "increase" and "decrease" percentage components of each index question will be tested for seasonality separately and adjusted accordingly if such patterns exist. If no seasonality is detected, the component will be left unadjusted.
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