The data is based on responses from 403 senior executives at middle market firms in a survey conducted by The Harris Poll from Jan. 8 to Feb. 16.
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The data is based on responses from 403 senior executives at middle market firms in a survey conducted by The Harris Poll from Jan. 8 to Feb. 16.
The MMBI eased slightly to 130.8 from 132.3 at the close of last year.
Nearly two-thirds of executives said they expect an improvement in economic conditions over the next six months.
Sixty-seven percent said they anticipate an improvement in both net earnings and revenues later this year.
The Middle Market Business Index is created in partnership with the U.S. Chamber of Commerce.
The RSM US Middle Market Business Index eased in the first quarter, but not enough to change our view that a sustained expansion will continue throughout this year amid improving productivity.
RSM US’s proprietary survey of business conditions in the middle market edged down to 130.8 from 132.3 at the close of last year. But the change was not statistically significant at either the 0.05 or 0.10 level, leaving our outlook unchanged.
Nearly two-thirds, or 62%, of the executives surveyed said they expect an improvement in economic conditions over the next six months, which is supported by the 67% who said they anticipate an improvement in both net earnings and revenues over that time.
Adding to the buoyant outlook, 59% said they intend to bolster productivity-enhancing capital expenditures. Based on the survey results overall, the primary takeaway is that executives have a bullish outlook on the year even as economic growth moderates from the blistering 3.1% pace of last year.
Results from the current quarter were a reflection of the economy’s resilience: 45% noted an improvement in current economic conditions, 46% said gross revenues and net earnings had improved, and 48% said they had accelerated their investments in capital expenditures.
Since the tail end of 2020, or 14 straight quarters, most middle market executives have said they intend to increase their outlays on software, equipment and intellectual property that make up cumulative capital expenditures.
It is not surprising that a three-year period of solid investment in firms’ ability to produce has resulted in an average increase of 3.9% in American productivity over the past three quarters.
While such robust gains in productivity are unsustainable, anything at or above 2.5% bodes well for an economy that can grow at a faster pace, retain a low unemployment rate and obtain price stability, all while bolstering living standards for all.
In addition, with the revolution in artificial intelligence and quantum computing at hand, firms would be wise to aggressively integrate sophisticated technology into the production of goods and provision of services.
Hiring and compensation in the first quarter remained rock solid, with 44% of executives noting they had increased hiring and 58% saying they intend to do so over the next six months.
With the U.S. economy at what we consider to be full employment, wage competition for midcareer, value-adding employees will remain challenging at best. Not surprisingly, 54% of executives said they had increased compensation to obtain workers and 65% said they expect to do so this year.
In the post-pandemic era, we have consistently noted that middle market firms should not anticipate a return to the pre-crisis status quo on inflation and employee compensation, and the current survey’s data reflects those new realities.
Join RSM US Chief Economist Joe Brusuelas and U.S. Chamber of Commerce Executive Vice President Neil Bradley as they discuss the current economic climate, including rising U.S. productivity, and the outlook for inflation and hiring.
Given those structural changes to the domestic economy, one would expect pricing to be a top concern. Indeed, 73% of the executives said they paid higher prices for goods and services, while 68% expect to do so going forward. As such, 48% said they passed along those higher prices and 58% indicated they intend to do so over the next six months.
Although inflation is slowing, given the strong level of aggregate demand, we are confident that middle market firms will retain some measure of pricing power.
And that solid demand underscores the fact that 45% of the executives said they had increased inventories in the current quarter, down slightly from the 47% that did so in the fourth quarter. In addition, 58% said they intend to increase inventories over the next six months, reflecting robust expectations around gross revenues and net earnings in the survey.
That being the case, it is not surprising that while only 19% of senior managers from the middle market companies indicated their access to credit was easier, 43% of these managers plan to borrow more capital going forward. Both of those figures eased from last year, which may indicate that robust business conditions and rising revenues have provided a much-needed respite from the pricing pressures of the past three years.
Should that strength continue, it would suggest that middle market firms have made their final adjustment to the shocks of the pandemic era and have pivoted into the emerging business conditions of a new economic era.
Middle market businesses’ continued optimism reflects the U.S. economy’s ongoing strength. It’s encouraging that businesses in the middle market remain positive about the economic outlook and their own revenue growth despite the fact that rising regulatory burdens and workforce challenges are creating headwinds and constraining growth.
Smaller organizations in the middle market need to close the gap between themselves and their larger counterparts on deploying resources to thwart rising cyberattacks, RSM data shows.
Cybersecurity budgets are set to rise relative to their organization’s revenues for nearly 37% of middle market companies whose executives were surveyed in the Q1 RSM US Middle Market Business Index survey, but a disparity in resource deployment exists between smaller midsize companies, or those with $10 million to $50 million in annual revenue, and larger organizations with annual revenue of $50 million to $1 billion.
Just 29% of smaller firms will boost their cybersecurity budgets, while nearly half (48%) of larger firms had plans to do so. The budget allocations come as breaches are on the rise. Overall, 28% of middle market organizations polled were breached last year, up from 20% a year earlier.
Ransomware attacks eased overall—with 30% of businesses in the MMBI indicating they had experienced at least one incident over the past year compared to 35% in 2023.
RSM will be releasing a full report on the survey’s cybersecurity findings in May.
You don’t have to go it alone—check out the ways we can help shore up your flanks.
Efficiently integrating digital technologies, such as artificial intelligence, IoT and data analytics.
We need to invest more in new technology.
Maintaining inventory levels, cutting lead times and maintaining quality control along the supply chain are just a few of the difficulties that organizations must overcome.
Staff burnout and the resulting morale and turnover issues.
Finding and retaining skilled employees has been a consistent challenge.
Because of the ongoing increases in our company's expenses, it is getting harder to stay profitable. We must figure out how to save expenses and simplify our processes without sacrificing quality.
To refer to the percentages in the subindex items, access the PDF.
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 have distinct challenges and opportunities around resources, labor, technology, innovation, regulation and more.
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 survey panel, the Middle Market Leadership Council, consists of 700 middle market executives, and is designed to accurately reflect conditions in the middle market. The data is weighted to ensure that they correspond to the U.S. Census Bureau data on the basis of industry representation.
A reading above 100 for the MMBI indicates that the middle market is generally expanding; below 100 indicates that it is generally contracting. The distance from 100 is indicative of the strength of the expansion or contraction.
The survey is conducted four times a year. The survey panel, the Middle Market Leadership Council, consists of 700 middle market executives, and is designed to accurately reflect conditions in the middle market.
The data for each quarter are weighted to ensure that they correspond to the U.S. Census Bureau data on the basis of industry representation.
The MMBI is borne out of the subset of questions in the survey that ask middle market executives to report the change in a variety of indicators.
The MMBI is a composite index computed as an equal weighted sum of the diffusion indexes for 10 survey questions plus 100 to keep the MMBI from becoming negative. The index is designed to capture both current and future conditions, with five questions on middle market executives' recent experience and five on their expectations for future activity.
The survey panel, the Middle Market Leadership Council, consists of 700 middle market executives, and is designed to accurately reflect conditions in the middle market.
The data for each quarter are weighted to ensure that they correspond to the U.S. Census Bureau data on the basis of industry representation.
RSM US LLP and The Harris Poll have collected data on middle market firms from quarterly surveys 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 survey panel, the Middle Market Leadership Council, consists of 700 middle market executives, and is designed to accurately reflect conditions in the middle market.
Now that enough observations exist, each question in the index will be 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 will 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.