July 26, 2024 – Milwaukee businesses expressed lackluster expectations toward third quarter growth according to a business outlook survey conducted by the Metropolitan Milwaukee Association of Commerce (MMAC). For the second consecutive quarter, the percentages of surveyed businesses expecting quarterly gains in sales, profits and employment (versus one year-ago) fell under 50%.
“While optimism remains low by historical standards, there has been some modest improvement in the quarter-to-quarter trend, particularly in regard to sales and profit levels,” said Bret Mayborne, the MMAC’s Vice President – Economic Research. “Whether this momentum translates into stronger second-half business growth is still an open question.”
Quarterly sales expectations remain lackluster. Forty-nine percent of businesses surveyed forecast higher real sales levels in the third quarter (vs. year-ago levels), 32% see third-quarter sales declines while 19% expect no change. On the positive side, the percentage expecting sales increases is up from the 44% who predicted sales gains for 2024’s second quarter but those forecasting sales gains ranked under 50% for the fourth consecutive quarter.
Expectations toward profits were modestly stronger. Fifty-two percent of surveyed companies expect third-quarter profit increases versus year-ago levels compared to the 43% who forecast second-quarter gains. Currently 29% see third-quarter profit decreases (vs. 2023’s third quarter) while 19% see no change.
The job situation in the metro area has remained soft throughout 2024 first half. The unemployment rate has ticked slightly upward (from year-ago levels) while persistent year-over year declines in nonfarm employment have averaged 0.5% over 2024’s first six months, registering declines across both the manufacturing and service sector alike.
Survey results on the future job outlook are mixed. Among all companies surveyed, those projecting third-quarter job increases outnumber those forecasting declines by a 42% to 24% margin respectively. In addition, a third of those surveyed (34%), see no change in job levels. Survey results suggest that businesses are somewhat less optimistic toward job prospects than three months ago. The current percentage forecasting employment gains slipped from the 48% who forecast second-quarter job increases.
By industry, manufacturers are more optimistic than non-manufacturers on job prospects. Fifty percent of manufacturers see third-quarter job gains while 36% of non-manufacturers see such gains. By size, large companies (those with 100 or more employees) are more likely to see year over-year job growth than small employers (54% vs. 33% respectively).
Despite the lackluster job trend, wage and salary trends are forecast to strengthen. Per employee wages and salaries are expected to increase at an average rate of 3.1% over the next 12 months, up from the 2.7% increase forecast three months ago.
Calendar Year 2024 Expectations
Expectations for 2024 as a whole closely align with third-quarter forecasts. Forty-eight percent of businesses surveyed see calendar year real sales gains in 2024 (vs. 2023 levels), outnumbering the 32% who expect sale declines. Twenty-one percent see no change. The percentage presently seeing sales gains is down from the 61% who started the year with such expectations.
Profit expectations also moved downward from the year’s start. Forty-nine percent of businesses now predict profit increases for 2024, down from the 61% who opened 2024 with such expectations. Currently, 33% see profit declines for the year while the remaining 17% predict no change.
Regarding jobs, employers are more likely to predict calendar year job gains than any other possibility. Forty-four percent of those surveyed see employment increases in their local operations for 2024 as a whole (versus 2023). Conversely, 24% forecast an annual job decline. The remaining 32% see no change. The year opened with similar job expectations when 44% of businesses projected job growth for the full year.
Capital spending plans remain low. Companies seeing capital spending increases (25%) in 2024 rank marginally higher than those predicting declines (24%), but over half (51%) see no change in capital spending plans. Those currently expecting 2024 increases rank well below the 43% who forecast such gains at the beginning of 2024.
Consumer prices nationally have increased by an average of 3.3% over the course of 2024’s first five months. Inflation expectations suggest more of the same for the remainder of the year. Currently the largest number of businesses (66%) see annual price inflation falling in the 3% to 5% range, closely matching expectations expressed six months ago. Currently, 24% see price inflation under 3% while only 9% predict inflation of 6% or more.
2024 Business Concerns
Businesses were asked to rank business concerns in 2024’s third quarter. Among the concerns listed, continuing economic growth and recovery ranked as the most concerning. This was followed by price inflation, supply chain issues and healthcare costs.
The Business Outlook Survey, conducted by the MMAC, contains responses from 63 Milwaukee area firms, both large and small, employing more than 13,000 people.
