The region’s economy will likely improve this quarter as companies plan to increase hiring and capital expenditures, according to Twin Cities Business’ quarterly economic indicator survey of more than 750 businesses across the state. But a shortage of qualified talent may slow the pace of growth.
Results from the survey—which asks businesses about their plans for the next three months—are used to tabulate the Minnesota Economic Outlook Index. For the second quarter of 2013, the index rose only slightly, to 50.8 from 49.9 last quarter. An index above 50 indicates potential economic expansion; below signals contraction. The current index is 8 percent below where it was one year ago at this time and compares with an average of 51 during the previous seven quarters.
On the bright side, more business leaders are optimistic about Minnesota’s economy (44 percent now compared with only 30 percent last quarter). This is the second-most optimistic sentiment since the survey was started two years ago; the most optimistic was one year ago at this time, when 50 percent of respondents expected Minnesota’s economy would improve through spring. They’re also similarly more optimistic about the global economy’s prospects in the months ahead.
Hitting a new high this quarter: leadership’s expectations for profitability; some 30 percent of respondents expect their operating profit margins will improve. This compares with 23 percent last quarter and a trailing seven-quarter average of 26.
Meanwhile, 32 percent of respondents expect to have a harder time finding qualified talent in the months ahead, also the highest percentage since mid-2011. Such concerns have surged 23 percent since the survey was conducted three months ago.
“The quality-of-life story has gotten very old, and younger, talented millennials want to live in a [geographical] climate that’s more moderate,” wrote one survey taker. “The boomer generation had to be physically located in a specific geography for work; however, the fact that we can all be more mobile and work virtually from anywhere means that many people will opt to live in more moderate climates. Most everyone I know age 50-plus plans to leave Minnesota within the next five years, and that will cause a large talent gap.”
Also among business leaders’ greatest concerns for the second quarter are increased taxes and regulation or other pressures from government. Among such responses:
“Business owners are treated like the enemy at the state and federal level, and, as a result, taxes and regulations keep being proposed and/or implemented. That shakes confidence. It causes business owners to delay hiring and delay adding capacity.”
“How do we grow profitably with government wanting more of our net monies and imposing/proposing higher taxes? Bastards: Let both state and federal leaders get their butts out and start a business, make payroll, etc. It’s very easy to spend other people’s monies—especially when your job is guaranteed for the next couple of years.”
Definitions: Percentage of respondents anticipating increases (Business Planning) or improvements (Business Conditions) in these areas during the second quarter of 2013 – diffusion index view: all responses for “increase” or “improve,” plus one-half responses for “maintain” or “stay the same.” Above 50 is positive; below is negative.
Twin Cities Business conducts this survey quarterly to provide a look at business planning and sentiment among leaders across all industries in Minnesota. Answers from 11 questions are used to formulate the Minnesota Economic Outlook Index, the only indicator of what business leaders across the state are planning for the immediate quarter.
An email link to an online survey was sent to 16,397 Minnesota business leaders in mid-March, and a reminder email was sent the following week to those who had not yet completed the survey. The Minnesota Chamber of Commerce provided some of the email addresses used in this outreach. As of March 28, 760 businesses responded, resulting in a 4.6 percent net response rate. Of those who responded, 86 percent represented privately held businesses.