The business outlook for midsized companies is the highest it has been since the economic downturn of a decade ago, according to M&T Bank’s Q1 Economic Outlook survey.
The survey showed that 70 percent of midsized companies feel the economy is better than it was six months ago (only 3 percent said it was worse).
The 70 percent mark was by far the highest optimism over the past eight years. In fact, only twice since the first quarter of 2010 (in 2011 and 2015) did the percentage go over 50 percent.
In addition, 72 percent of the respondents expect the U.S. economy to improve in the next six months (with only 8 percent feeling it will get worse).
That number is well above the survey’s low of 2016, when only 24 percent felt the economy was going to get better and 30 percent felt it was going to get worse.
All of this optimism is expected to lead to more hiring, as 35 percent of companies said they expect to increase hiring, as opposed to 26 percent in 2017.
M&T New Jersey Region President Tom Comiskey was not surprised by the results. Comiskey said the bank saw increasing levels of optimism at the end of 2017, optimism that only grew with the federal tax reform legislation.
“We’ve definitely witnessed a sense of economic optimism among most of our New Jersey clients in late 2017 and early 2018, particularly with the passage of tax reform,” he said. “M&T saw very strong loan demand in the New Jersey middle market segment during 2017.
“Overall, we’ve seen many companies investing in their plants and equipment, particularly in the manufacturing, warehousing and distribution sectors, and we expect that to continue during 2018, particularly to support infrastructure improvements and activity around the ports.”
As a result of the tax changes, 29 percent of firms said they planned to increase capital expenditures and 25 percent said they plan to increase worker wage rates.
With optimism, however, comes some concerns.
An increasingly tight labor market likely will make it challenging for firms to acquire and retain top talent. And the current trade negotiations, which could lead to increase tariffs and changes in business costs, must be watched.
“It remains to be seen what the impact of the various trade agreement discussions will be for local businesses,” Comiskey said.
If midlevel business leaders were given their say, they would have President Donald Trump tackle other issues.
In terms of legislative priorities, respondents were most interested in seeing Congress make another attempt at health care reform (33 percent), increased infrastructure spending (29 percent) and a reduction in regulatory requirements (29 percent). Only 4 percent put renegotiating trade agreements their top request.
The survey was conducted by M&T during January and February 2018 among senior managers and owners of midsized businesses located throughout the bank’s geographic footprint.
A total of 249 responses were received, consisting of 211 middle-market enterprises (annual sales of $10 million to $500 million) and 38 commercial real estate investors/lessors.
M&T has conducted the survey since mid-2009.