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RSM US Middle Market Business Index: Business Conditions on the Rise

The RSM US Middle Market Business Index (MMBI), collaborated on by RSM US LLP and the U.S. Chamber of Commerce, revealed a boost in business conditions for middle market firms, climbing to 131.8 in the fourth quarter from 130.4 previously. This figure, which is seasonally adjusted, portrays a strong backdrop for business, rooted in increasing household spending, stable fixed business investment, and favorable supply-side conditions.

Responding to input from 404 senior executives during a survey designed by The Harris Poll between October 1 and October 22, 2024, before the impactful presidential election, the findings illuminated a shift in sentiment among middle-market executives. According to Joe Brusuelas, the chief economist at RSM US LLP, expectations for lower taxes, less regulatory burden, and a solid economic environment amplify the current optimistic outlook.

Among the findings, nearly 44% of executives reported improvements, and 62% anticipate a positive shift in business conditions over the next six months. The sentiment regarding gross revenue and net earnings appears favorable as well; half of the surveyed executives noted that gross revenues had increased, and 45% reported improvements in net earnings. When projecting into the first half of the coming year, 68% of executives foresee further increases in gross revenue, while 62% expect net earnings to amplify, assuming favorable policy changes.

Moreover, RSM's analysis indicated that potential alterations in the tax code could act as a catalyst for enhancing capital expenditure forecasts for middle market firms. In the current quarter, a significant 44% of executives have cited increases in spending on items such as software, equipment, and intellectual property, while 55% have plans for further investment in these areas.

Neil Bradley, the executive vice president and chief policy officer at the U.S. Chamber of Commerce, remarked on the resilience and adaptability demonstrated by middle market businesses, which have shown robust growth as the year approaches its end. The confirmation of this growth ideally aligns with the anticipation that newly elected officials will implement policies that bolster and accelerate economic momentum in the coming decade.

However, the report does not overlook the persistent challenges within the tight labor market. With demands for skilled labor remaining high, over half of respondents (54%) have indicated they are increasing compensation levels, and 64% plan to do so as the new year commences. Nonetheless, only 40% have succeeded in expanding their workforce, underscoring the ongoing shortage of skilled workers in the sector. The report suggests that while 56% of firms intend to boost their hiring rates, the labor market's constraints complicate these plans.

In addition to workforce matters, the middle market is grappling with rising operational costs. About 68% of executives acknowledged that they have incurred higher expenses for goods and services, with 71% expecting costs to escalate in the near future. Surprisingly, only 51% of respondents have managed to pass these cost increases onto their customers.

Summary of the RSM US Middle Market Business Index

The RSM US Middle Market Business Index is a quarterly overview developed in partnership with the U.S. Chamber of Commerce, drawing insights from middle market firms beginning its research in early 2015. The comprehensive survey consists of around 1,600 middle market executives, aimed at accurately gauging their current economic condition.

The survey encompasses questions about various performance indicators, including revenues, profits, employee compensation, and inventory status. For every quarter, executives respond to a total of 20 questions divided into two sets that monitor changes from the previous period and expectations for the upcoming six months.

RSM is committed to equipping middle market companies globally with insights relevant for guiding them through change. Partnering with clients across over 120 countries facilitates their growth and ensures a solid impact on their operations and communities. For further information, visit rsmus.com or engage with them on social platforms.