The RSM US Middle Market Business Index (MMBI) jumped in the most recent quarter, reflecting growth for mid-sized companies and businesses.
The index, produced by RSM and the U.S. Chamber of Commerce, climbed to 132.9 in the fourth quarter, up from 129.6 in the previous quarter. The MMBI survey results reflect the strong 4.9 percent pace of growth and 4.7 percent increase in productivity in the quarter. Overall, the results underscore the health of the U.S. middle market and an overall economy that is expected to grow at or above the long-term trend of 1.8 percent next year.
“The major takeaway from the fourth quarter survey is that middle market firms expect to continue making productivity-enhancing capital investments to bolster output,” Joe Brusuelas, chief economist with RSM US, said. “We anticipate improved corporate earnings ahead as pricing pressures ease and the past outlays on software, equipment and intellectual property boost overall economic activity at a reduced cost.”
The report showed that 42 percent saw an improvement in general economic conditions, up from 36 percent previously, while 39 percent said there was some deterioration. Also, 62 percent of survey respondents said they anticipate an improvement in economic conditions through the middle of next year. Additionally, 44 percent of those surveyed said they had better revenues and 41 percent noted improved earnings. In contrast, 32 percent and 37 percent, respectively, indicated deterioration in the two. Further, 72 percent of executives expect strong revenues and 71 percent anticipate improved net earnings over the next six months. RSM attributes middle market pricing power as one reason why firms remain optimistic about revenues and net earnings.
“Looking ahead to 2024, it is encouraging to see that businesses in the middle market have improved their outlook on the economy,” Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce, said. “As businesses continue to invest in their growth, they need policymakers in D.C. to get serious about investing in them.”
Among other findings, 26 percent of surveyed executives said they increased borrowing to finance commercial and industrial loans and 49 percent said that they would do so during the next six months. Also, 46 percent of MMBI survey participants boosted outlays on capital expenditures, and 66 percent said they intend to do so over the next half year. In contrast, only 20 percent of executives said they pulled back on capital expenditures and 9 percent intend to pull back over the next six months.
In addition, approximately 44 percent of firms increased hiring and 66 percent said they intend to do so during the next 180 days. Further, 52 percent of participants increased employee compensation and 68 percent said they would do so in the near term. However, 71 percent of reported paying more for basic goods and 75 percent said they expect to continue paying more over the next six months.