United States

RSM US Middle Market Business Index Shows Strong Q4 Performance

Expectations strong for capital expenditures, investments and compensation



Released today, the RSM US LLP (“RSM”) Middle Market Business Index (MMBI) indicates continued middle market expansion, with business leaders expecting sustained modest to strong revenue performance in the months ahead. The MMBI rose to 120.1 in the fourth quarter, up from the third quarter’s calendar-year low of 115.6. A reading above 100 indicates an expanding middle market.

According to RSM Chief Economist Joseph Brusuelas, the index shows business conditions for the middle market improved strongly from this point a year ago, when the index performed at its all-time low of 114.5.

“This quarter, survey respondents reported an uptick in overall business sentiment, with an expectation of increasing capital expenditures, hiring and compensation – all of which are critical to U.S. economic growth,” Brusuelas said. “We have been on a good run of strong job gains, and the results show businesses are benefiting from consumer confidence driving overall spending.”

Survey results were collected prior to the US presidential election, meaning business leaders felt confident, even in a period of uncertainty. “The new administration’s plan for regulatory relief may be a further boon for middle market businesses that hope to benefit from deregulation or selective enforcement,” Brusuelas added.

The US middle market represents 40 million jobs, more than 200,000 businesses and 40 percent of U.S. GDP. What’s more, the data underlying the index reading was gathered between September 26 and October 21, suggesting this index could be a leading indicator for consumer spending and many of the other reports slated for publication throughout the fourth quarter and early 2017.

The RSM MMBI joins recent unemployment and other economic data showing an improving US economy. These data are being watched closely as the market speculates about whether the Federal Reserve will announce a rate hike this month for only the second time in 10 years.

About the RSM US Middle Market Leadership Council survey and index
RSM US LLP has commissioned Nielsen to collect 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 consists of 700 middle market executives and is designed to accurately reflect conditions in the middle market.

The RSM Middle Market Business Index, or MMBI, is borne out of the subset of questions in the survey that ask respondents to report the change in a variety of indicators. Respondents are asked a total of 20 questions patterned after those in other qualitative business surveys, such as those from the Institute of Supply Management and National Federation of Independent Businesses.

The 20 questions relate to changes in various measures of their business, such as revenues, profits, capital expenditures, hiring, employee compensation, prices paid, prices received and inventories. There are also questions that pertain to the economy and outlook, as well as to credit availability and borrowing. For 10 of the questions, respondents are asked to report the change from the previous quarter; for the other 10 they are asked to state the likely direction of these same indicators six months ahead.

The responses to each question are reported as diffusion indexes. 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. 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.

RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine 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.

RSM US LLP is the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with 51,000 people across 123 countries. For more information, visit rsmus.com, like us on Facebook, follow us on Twitter and/or connect with us on LinkedIn.