Middle Market Business Index: Market Sentiment Improves as Firms Look to Invest

The Q2 2024 RSM US Middle Market Business Index (MMBI) rose to 132.0 in Q2 from 130.7 in the prior quarter on a seasonally adjusted basis. This reflects a sustained business expansion characterized by historically low unemployment, strong household consumption and robust business revenues. The Middle Market Business Index is created in partnership with the U.S. Chamber of Commerce.

A sustained business expansion characterized by historically low unemployment, strong household consumption and robust business revenues continued to provide a tailwind for the American real economy in the second quarter.

Key findings include:

• Economy: 40% of middle market executives noted an improvement in the economy, while 32% said conditions had deteriorated. RSM estimates this is due to the long tail of the pandemic and subsequent price shock extracting a powerful toll on smaller firms.
• Revenue: Nearly half of respondents said their gross revenue (47%) and net earnings (45%) improved in the second quarter and 68% said they expect an improvement in gross revenues over the next six months.
• Hiring: Hiring remained consistent with Q1, as 44% of executives noted they had increased hiring. 74% of executives reported they are significantly or somewhat concerned about access to skilled labor; 75% hsaid the same about the cost of labor.
• Prices: MMBI data suggests that prices have steadied. 71% of executives said they paid higher prices for goods and services, while 67% expect to do so in the next six months. More than half (52%) said they passed along those higher prices.
• Borrowing: The ability of midsize firms to access capital necessary for expansion improved significantly in the second quarter, with 29% of firms indicating that borrowing had become less tight, up from 20% earlier in the year.

Since rebounding from the trough of the pandemic, the index has moved in a range of 125.5 to 140.7, which compares favorably to the pre-pandemic range of 117.3 to 138.4. The survey's high, posted in the third quarter of 2021 as the economy snapped back from the pandemic shutdown, was 140.7.