| Fourth quarter MMAC business outlook survey |
Fourth Quarter Business Outlook Survey
October 26, 2020 - Pandemic-related economic weakness continues in the Milwaukee Region, as Milwaukee area businesses expect fourth-quarter declines in real sales and profits in comparison to year-ago levels, according to a new Business Outlook Survey conducted by the Metropolitan Milwaukee Association of Commerce (MMAC.) However, the level of pessimism has diminished somewhat since our third-quarter survey -- and early expectations toward 2021 are generally positive.
“Right now, we’re seeing a mix of short-term pessimism and longer-term optimism from Milwaukee Region business leaders,” said Bret Mayborne, the MMAC’s economic research director. “Most of the businesses we surveyed expect to see sales and profit declines for the fourth quarter, relative to a year ago, because of the lingering effects of COVID-19. At the same time, more businesses are optimistic about the fourth quarter than they were when we last asked them three months ago, and there is a broader sense of optimism for 2021.”
How these projections play out will largely be determined by the future strength of the recovery. Survey results suggest some measure of optimism in this regard: 29% of businesses see real sales increases for calendar year 2020 while 61% expect declines. The percentage seeing gains is modestly higher than the 23% who predicted gains leading into 2020’s third quarter. When asked for 2021 sales forecasts, expectations were much brighter. Sixty-three percent see real sales gains in 2021 while 22% see declines. The remainder (14%) see no change.
October 26, 2020 - Pandemic-related economic weakness continues in the Milwaukee Region, as Milwaukee area businesses expect fourth-quarter declines in real sales and profits in comparison to year-ago levels, according to a new Business Outlook Survey conducted by the Metropolitan Milwaukee Association of Commerce (MMAC.) However, the level of pessimism has diminished somewhat since our third-quarter survey -- and early expectations toward 2021 are generally positive.
“Right now, we’re seeing a mix of short-term pessimism and longer-term optimism from Milwaukee Region business leaders,” said Bret Mayborne, the MMAC’s economic research director. “Most of the businesses we surveyed expect to see sales and profit declines for the fourth quarter, relative to a year ago, because of the lingering effects of COVID-19. At the same time, more businesses are optimistic about the fourth quarter than they were when we last asked them three months ago, and there is a broader sense of optimism for 2021.”
How these projections play out will largely be determined by the future strength of the recovery. Survey results suggest some measure of optimism in this regard: 29% of businesses see real sales increases for calendar year 2020 while 61% expect declines. The percentage seeing gains is modestly higher than the 23% who predicted gains leading into 2020’s third quarter. When asked for 2021 sales forecasts, expectations were much brighter. Sixty-three percent see real sales gains in 2021 while 22% see declines. The remainder (14%) see no change.
Fourth Quarter Expectations
For 2020’s fourth quarter by itself, survey results show a quarterly sales decline as most likely but hints at improvement. A majority of companies surveyed (55%) see real sales declines vs. one year ago, more than double the number expecting increased sales levels (27%). Eighteen percent see no change. The percentage seeing sales increases rose modestly from the 23% who forecast third-quarter year-over-year sales increases.
Quarterly profit expectations showed some improvement in the past three months. Companies expecting fourth-quarter profit level declines (47%) still outnumber those seeing profit increases (35%), but the number seeing increases improved from that expressed for 2020’s third quarter when 24% forecast profit increases. At present 18% see no change in profits.
Regarding jobs, after the initial shock of COVID-19 shutdowns, nonfarm employment levels in metro Milwaukee have grown month-to-month in each of the past five months (May through September.) Seasonally adjusted nonfarm employment levels in metro Milwaukee have grown by 55,900 jobs in this period vs. the initial loss of 111,200 jobs, a recovery rate to date of 50% of lost jobs.
Expectations toward future job levels remain tempered but with some positive signs. Versus year-ago levels, 21% of those surveyed see job increases while 23% see declines. The percentage predicting fourth-quarter employment growth fell marginally from third-quarter levels, but the percentage expecting declines fell significantly from third-quarter forecasts – from 41% three months ago to the current 23%, a decline of nearly twenty percentage points. Currently the majority of companies (56%) see no change in fourth-quarter job levels vs. one year ago.
By industry, manufacturers are more likely to forecast job gains than jobs losses: 29% see gains while 19% see losses. Likewise, large employers (100 or more employees) have a stronger positive job expectation: 24% see gains, 20% see losses. In each case a majority of those surveyed expect no change in jobs.
Wage and salary expectations rebounded a bit from flat third-quarter results. Employers project an average annual increase of 1.5% in per employee wages and salaries over the next 12 months. The forecast average is up from the 0.2% rise projected three months ago.
CALENDAR YEAR EXPECTATIONS
With only one quarter remaining in 2020, 29% of businesses surveyed predict rising real sales levels for 2020 as a whole. This forecast is up slightly from the 23% who saw 2020 calendar year sales gains three months ago and marks a significant negative turn from the 78% who forecast 2020 sales gains in 2020’s first quarter -- before the onset of pandemic effects. Currently, the majority of businesses (61%) expect sales declines for 2020 as a whole, while 11% predict no change.
Metro area businesses are optimistic about the coming calendar year. Sixty-three percent of surveyed businesses see real sales gains in 2021 (vs. 2020) while 22% project declines. The remaining 14% see no change. These expectations are marginally lower than initial pre-pandemic sales forecasts for calendar year 2020 given 12 months ago when 68% of survey respondents forecast sales gains for the forthcoming calendar year (2020.)
Comparatively, manufacturers expressed a higher level of optimism toward 2021. Seventy-one percent of manufacturers expect real sales gains for the year vs. 61% among non-manufacturers. By employment size, 66% of small employers see real sales gains in 2021 vs. 60% for large employers (100 or more employees.)
COVID-19 RELATED QUESTIONS
The economic effects of COVID-19 have been harsh and wide-ranging. The question of when businesses expect to get back to normal becomes critical. In that regard, 16% of those surveyed indicated that they are already back to normal business activity. Additionally, 5% forecast their businesses would be back to normal during 2020’s fourth quarter. The largest percentage of those surveyed see “back to normal” coming some time in 2021 – 12% in 2021’s first quarter and 47% sometime in 2021’s final three quarters. Fifteen percent see normal business activity sometime beyond 2021.
In regard to operational status and long-term effects of the crisis, 75% of businesses surveyed indicated their business is fully open while 25% said operations are open but limited. In terms of business viably, 47% indicated they were not concerned at all, 41% suggested being somewhat concerned and 12% indicated being very concerned about remaining a viable business.
Business have seen remote work as a means to operate under COVID-19 restrictions and provide a safe work environment. The extend of remote work varies widely by industry and situation. Thirty percent of businesses surveyed indicated the percentage of their workforce working remotely at greater than 50%. Forty-seven percent indicated remote workers representing 1% to
50% of their workforce and 22% had no remote workers in their workforce. As to the future extent of remote work, the largest number of those surveyed (62%) indicated that they did not expect any change in remote work in 2020’s fourth quarter, 9% see an increase in remote work and 12% see a decrease. The remainder did not use remote workers.
The Business Outlook Survey was conducted by the MMAC in early October and contains responses from 105 Milwaukee-area firms, both large and small.
Quarterly profit expectations showed some improvement in the past three months. Companies expecting fourth-quarter profit level declines (47%) still outnumber those seeing profit increases (35%), but the number seeing increases improved from that expressed for 2020’s third quarter when 24% forecast profit increases. At present 18% see no change in profits.
Regarding jobs, after the initial shock of COVID-19 shutdowns, nonfarm employment levels in metro Milwaukee have grown month-to-month in each of the past five months (May through September.) Seasonally adjusted nonfarm employment levels in metro Milwaukee have grown by 55,900 jobs in this period vs. the initial loss of 111,200 jobs, a recovery rate to date of 50% of lost jobs.
Expectations toward future job levels remain tempered but with some positive signs. Versus year-ago levels, 21% of those surveyed see job increases while 23% see declines. The percentage predicting fourth-quarter employment growth fell marginally from third-quarter levels, but the percentage expecting declines fell significantly from third-quarter forecasts – from 41% three months ago to the current 23%, a decline of nearly twenty percentage points. Currently the majority of companies (56%) see no change in fourth-quarter job levels vs. one year ago.
By industry, manufacturers are more likely to forecast job gains than jobs losses: 29% see gains while 19% see losses. Likewise, large employers (100 or more employees) have a stronger positive job expectation: 24% see gains, 20% see losses. In each case a majority of those surveyed expect no change in jobs.
Wage and salary expectations rebounded a bit from flat third-quarter results. Employers project an average annual increase of 1.5% in per employee wages and salaries over the next 12 months. The forecast average is up from the 0.2% rise projected three months ago.
CALENDAR YEAR EXPECTATIONS
With only one quarter remaining in 2020, 29% of businesses surveyed predict rising real sales levels for 2020 as a whole. This forecast is up slightly from the 23% who saw 2020 calendar year sales gains three months ago and marks a significant negative turn from the 78% who forecast 2020 sales gains in 2020’s first quarter -- before the onset of pandemic effects. Currently, the majority of businesses (61%) expect sales declines for 2020 as a whole, while 11% predict no change.
Metro area businesses are optimistic about the coming calendar year. Sixty-three percent of surveyed businesses see real sales gains in 2021 (vs. 2020) while 22% project declines. The remaining 14% see no change. These expectations are marginally lower than initial pre-pandemic sales forecasts for calendar year 2020 given 12 months ago when 68% of survey respondents forecast sales gains for the forthcoming calendar year (2020.)
Comparatively, manufacturers expressed a higher level of optimism toward 2021. Seventy-one percent of manufacturers expect real sales gains for the year vs. 61% among non-manufacturers. By employment size, 66% of small employers see real sales gains in 2021 vs. 60% for large employers (100 or more employees.)
COVID-19 RELATED QUESTIONS
The economic effects of COVID-19 have been harsh and wide-ranging. The question of when businesses expect to get back to normal becomes critical. In that regard, 16% of those surveyed indicated that they are already back to normal business activity. Additionally, 5% forecast their businesses would be back to normal during 2020’s fourth quarter. The largest percentage of those surveyed see “back to normal” coming some time in 2021 – 12% in 2021’s first quarter and 47% sometime in 2021’s final three quarters. Fifteen percent see normal business activity sometime beyond 2021.
In regard to operational status and long-term effects of the crisis, 75% of businesses surveyed indicated their business is fully open while 25% said operations are open but limited. In terms of business viably, 47% indicated they were not concerned at all, 41% suggested being somewhat concerned and 12% indicated being very concerned about remaining a viable business.
Business have seen remote work as a means to operate under COVID-19 restrictions and provide a safe work environment. The extend of remote work varies widely by industry and situation. Thirty percent of businesses surveyed indicated the percentage of their workforce working remotely at greater than 50%. Forty-seven percent indicated remote workers representing 1% to
50% of their workforce and 22% had no remote workers in their workforce. As to the future extent of remote work, the largest number of those surveyed (62%) indicated that they did not expect any change in remote work in 2020’s fourth quarter, 9% see an increase in remote work and 12% see a decrease. The remainder did not use remote workers.
The Business Outlook Survey was conducted by the MMAC in early October and contains responses from 105 Milwaukee-area firms, both large and small.