CHICAGO –(December 17, 2024) – The RSM US Middle Market Business Index (MMBI), presented by RSM US LLP (“RSM”) in partnership with the U.S. Chamber of Commerce, increased to 131.8 in the fourth quarter from 130.4 in the prior period on a seasonally adjusted basis. The MMBI survey results reflect robust business conditions in the middle market, driven by strong household spending, solid fixed business investment and a supply-side tailwind. The data is based on responses from 404 senior executives at middle market firms in a survey conducted by The Harris Poll from Oct. 1 to Oct. 22, 2024, before the presidential election on Nov. 5.
“Middle market business conditions remain stout and are almost certain to improve amid expectations of lower taxes, reduced regulation and a strong economy,” said Joe Brusuelas, chief economist with RSM US LLP. “We anticipate a move higher in the top-line index in the first two quarters of next year as firms recalibrate expectations based on a lighter regulatory framework and an expansionary fiscal policy.”
Firms Report Solid Business Performance and Increasingly Optimistic Outlook
The MMBI survey shows that respondents’ overall sentiment on the economy improved modestly in the most recent quarter. Forty-four percent of middle market executives noted an improvement, and 62% said they expect a general improvement over the next six months.
The results also indicate the outlook on gross revenues and net earnings remained solid, with half of the respondents indicating gross revenues improved and 45% reporting improved net earnings. Looking ahead through the first half of next year, 68% of executives expect further improvement in gross revenues and 62% anticipate improved net earnings. RSM expects both forward-looking figures to increase with probable tax cuts and reduced regulatory risk in 2025.
The MMBI report explains that likely changes to the tax code on business fixed investment could also spur improved outlays on capital expenditures. In the current quarter, 44% of respondents reported increased spending on software, equipment and intellectual property, and 55% said they intend to increase spending on those items.
“Middle market businesses continue to demonstrate remarkable resilience and adaptability, driving robust growth as we close out the year,” said Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce. “The U.S. Chamber is counting on our newly elected officials to match that optimism with policies that will support and accelerate economic growth over the next decade.”
Tight Job Market Persists as Firms Increase Compensation; Pricing Challenges Continue
With the labor market remaining tight and a continued premium on skilled workers, it is unsurprising that 54% of survey participants reported increasing compensation and 64% indicated they expect to do so in the new year.
Only 40% of firms said they had increased hiring. Fifty-six percent of respondents indicated they intend to increase the pace of hiring, but the MMBI report notes the ongoing shortage of workers will make that difficult.
The rising cost of doing business also continues to challenge the middle market, which is underscored by the 68% of executives who said they paid more for goods and services and the 71% who said they anticipate paying more over the next six months. Only 51% of respondents said they passed through higher costs.
About the RSM US Middle Market Business Index
RSM US LLP and the U.S. Chamber of Commerce have partnered to present the RSM US Middle Market Business Index (MMBI). It is based on research of middle market firms conducted by Harris Poll, which began in the first quarter of 2015. The survey is conducted four times a year, in the first month of each quarter: January, April, July and October. The survey panel consists of approximately 1,600 middle market executives and is designed to accurately reflect conditions in the middle market.
Built in collaboration with Moody’s Analytics, the MMBI is borne out of the subset of questions in the survey that asks respondents to report the change in a variety of indicators. Respondents are asked a total of 20 questions patterned after those in other qualitative business surveys, such as those from the Institute of Supply Management and National Federation of Independent Businesses.
The 20 questions relate to changes in various measures of their business, such as revenues, profits, capital expenditures, hiring, employee compensation, prices paid, prices received and inventories. There are also questions that pertain to the economy and outlook, as well as to credit availability and borrowing. For 10 of the questions, respondents are asked to report the change from the previous quarter; for the other 10 they are asked to state the likely direction of these same indicators six months ahead.
The responses to each question are reported as diffusion indexes. The MMBI is a composite index computed as an equal weighted sum of the diffusion indexes for 10 survey questions plus 100 to keep the MMBI from becoming negative. A reading above 100 for the MMBI indicates that the middle market is generally expanding; below 100 indicates that it is generally contracting. The distance from 100 is indicative of the strength of the expansion or contraction.
About The U.S. Chamber of Commerce
The U.S. Chamber of Commerce is the world’s largest business organization representing companies of all sizes across every sector of the economy. Members range from the small businesses and local chambers of commerce that line the Main Streets of America to leading industry associations and large corporations.
They all share one thing: They count on the U.S. Chamber to be their voice in Washington, across the country, and around the world. For more than 100 years, we have advocated for pro-business policies that help businesses create jobs and grow our economy.
About RSM US LLP
RSM empowers middle market companies worldwide to take charge of change. The clients we serve are the engine of global commerce and economic growth. Our unique middle market perspective makes RSM the natural choice for growth-oriented, internationally active organizations seeking relevant insights and tailored, innovative solutions for a complex and changing world. With a global reach spanning more than 120 countries, we instill confidence in a world of change by bringing the full power of RSM to make a lasting impact on our clients, colleagues and communities. For more information, visit rsmus.com, like us on Facebook, follow us on X and/or connect with us on LinkedIn.
