Q4 2023 Middle Market Business Index Moves Up

Firms show optimistic outlook, continued productivity-boosting investments; no indication of significant pullback despite cool sentiment on the economy.

Key Q4 MMBI findings include:

• Economy: 42% of respondents indicated an improvement in general economic conditions, up from 36% previously. Looking ahead, 62% of respondents indicated they anticipate an improvement in economic conditions through the middle of next year.
• Revenue: 44% of executives indicated better revenues and 41% noted improved earnings in the current quarter. 72% of executives expect strong revenues and 71% anticipate improved net earnings over the next six months.
• Labor & Compensation: In the current quarter, approximately 44% of firms increased hiring and 66% said they intend to do so during the next 180 days. Roughly 52% of participants increased employee compensation and 68% said they would do so in the near term.
• Prices: 71% of respondents reported paying more for basic goods in the current quarter and 75% said they expect to continue paying more over the next six months

The RSM US Middle Market Business Index (MMBI), presented by RSM US LLP in partnership with the U.S. Chamber of Commerce, increased to 132.9 in the fourth quarter from 129.6 in the previous quarter on a seasonally adjusted basis. The MMBI survey results reflect the strong 4.9% pace of growth and 4.7% increase in productivity in the third quarter, underscoring the health of the U.S. middle market and an overall economy that is expected to grow at or above the long-term trend of 1.8% next year.

"The major takeaway from the fourth quarter survey is that middle market firms expect to continue making productivity-enhancing capital investments to bolster output," said Joe Brusuelas, chief economist with RSM US LLP. "We anticipate improved corporate earnings ahead as pricing pressures ease and the past outlays on software, equipment and intellectual property boost overall economic activity at a reduced cost. While sentiment on the economy remains somewhat sour, it is simply not stopping middle market businesses from expanding their operations."