United States

Middle Market Showed Strong Economic Sentiment Prior to COVID-19 Outbreak

RSM US Middle Market Business Index significantly increased in the first quarter, but concerns over coronavirus dampen outlook



The RSM US Middle Market Business Index (MMBI), presented by RSM US LLP (“RSM”) in partnership with the U.S. Chamber of Commerce, rose in the first quarter, revealing a positive economic outlook among middle market business leaders that was driven by strong improvement in gross revenues and net earnings. Executives expressed confidence in the continued improvement of the U.S. economy, but coronavirus, a health issue of global and economic significance, is expected to have a substantial impact on future sentiment.

In the first quarter of 2020, the MMBI increased significantly, posting a composite score of 132.0, compared to the 127.3 from last quarter. At the time of the survey, 40% of business leaders indicated that the economy improved. Increases in both gross revenues and net earnings boosted the MMBI, with 61% of executives reporting improved revenues during the quarter. Similarly, 52% said net earnings increased over the past 90 days.


“It’s important to note that we fielded this quarter’s survey before the recent economic impact of coronavirus began taking hold,” said Joe Brusuelas, RSM US LLP chief economist. “As concerns over the pandemic proliferate in the global economy, middle market businesses are going to experience a supply shock in the first six months of the year. However, the numbers in the MMBI point to the underlying strength of middle market business conditions, which could be enough to help businesses weather the storm and absorb supply shocks caused by the virus.”

To increase RSM’s ability to track the impact of COVID-19 on the real economy, RSM will be measuring and reporting the MMBI on a monthly basis for the next several months.

Cyberthreats Remain High
Responses from this quarter’s MMBI also showed that security threats remain a dominant concern for middle market companies, as data breaches ticked up from a year earlier.

Unauthorized access to data has occurred at 18% of businesses polled in the first quarter, up from 15% a year earlier, and more than one-fifth of respondents said they experienced data-related incidents that took the form of ransomware attacks, up slightly from the same period in 2019.

Data and privacy issues for middle market businesses is the topic of RSM’s upcoming MMBI special report on on cybersecurity. The full findings will be released in a special report.

The survey data that informs the index reading was gathered between January 13 and January 31, 2020.

To learn more about the middle market and the MMBI, visit the RSM website. To stay informed with the latest insights, ideas and countermeasures to minimize the outbreak’s negative effects, as well as prepare for future emergency events, visit RSM’s COVID-19 Resource Center

About the RSM US Middle Market Business Index
RSM US LLP and the U.S. Chamber of Commerce have partnered to present the RSM US Middle Market Business Index (MMBI). It is based on research of middle market firms conducted by 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 survey panel consists of 700 middle market executives and is designed to accurately reflect conditions in the middle market.

Built in collaboration with Moody’s Analytics, the 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.

About The U.S. Chamber of Commerce
The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations. For more information, visit uschamber.com and FreeEnterprise.com, like us on Facebook and follow us on Twitter.

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.