M&T Bank’s first quarter Economic Outlook Survey said potential changes in economic policy under the Trump Administration are fueling optimism within businesses.
The survey found that 70 percent of middle market firms expect the economy to improve in the next six months, the highest reading since the recession. In the first quarter of 2016, only 24 percent expected economic improvement. Forty-four percent said the economy has improved over the last six months.
Sixty-seven percent of commercial real estate firms were optimistic that the economy would improve over the next six months, up from 27 percent a year ago, and 54 percent said the economy has improved in the past year.
Despite optimism around the direction of the economy, business fundamentals are mostly unchanged. The survey found that 26 percent of respondents plan to increase hiring, down slightly from a year earlier. Forty-five percent expect to increase sales, up from 35 percent one year ago, and 42 percent expect an increase in capital expenditure, up from 35 percent last year.
While little change is anticipated for sales and hiring, the brighter outlook for economic growth is largely related to expected regulatory relief and tax reform by the Trump Administration. The biggest challenges for middle market firms — healthcare costs, regulatory compliance, and taxes – are all expected to be addressed by the new President. Relief in these areas are expected to drive the bottom line.