Reversing a trend seen in the past three quarters, business leaders from across Minnesota expressed a drop in overall optimism about business conditions in the state, according to Twin Cities Business’ quarterly economic indicator survey.
Fewer business leaders are optimistic about the economy today compared to three months ago, according to Twin Cities Business’ most recent quarterly economic indicator survey.
Of the 490 business leaders who participated in the June survey, 33 percent said that they believe business conditions in Minnesota will improve during the third quarter (July through September)—down from 50 percent of respondents who entered the second quarter anticipating better times ahead.
The change in outlook follows three consecutive quarters in which there was an increase in optimism, and the dip in confidence appears to be primarily due to factors beyond Minnesota, including the European debt crisis.
One respondent wrote: “We thought this would be a good year financially, but with the euro crisis, things are not looking that good.”
Only 25 percent of the respondents said that they believe the national and global economies will improve during the third quarter—a 50 percent drop compared to respondents who were optimistic as they entered the second quarter.
While confidence in the Minnesota economy is down compared with the last quarter, it is still stronger than one year ago: Only 25 percent had expressed optimism for last year’s third quarter, and the percentage of those who believe business conditions will worsen this summer (15 percent) is down from 32 percent who voiced such pessimism a year ago.
Meanwhile, a smaller percentage of Minnesota businesses plan to increase their spending compared to investments during the prior quarter: 32 percent of businesses plan to increase capital expenditures compared to 38 percent in the second quarter, and only 20 percent plan to spend more on research and development, compared to 28 percent last quarter. Fifty-seven percent of the respondents expect to maintain the same levels of capital expenditure as the second quarter, and 72 percent will spend the same on research and development as they did in the second quarter.
Finding qualified employees remains a concern, with 29 percent of respondents expecting it to become more difficult in the months ahead—the same percentage of leaders who reported this concern heading into the second quarter. Only 6 percent of respondents believe finding qualified talent will be easier during the third quarter.
Meanwhile, Twin Cities Business’ last four quarterly surveys found that an average of 35 percent of respondents plan to increase their work force in the months ahead, and an average of 60 percent forecast increased profitability.
Additional information from the survey—including charts detailing which Minnesota industries are expecting to most actively hire, increase revenues, and increase investments in infrastructure this quarter—can be found in the August issue of Twin Cities Business, available online here and in print at select newsstands.
Twin Cities Business conducts this survey quarterly to provide a look at business planning and sentiment among leaders across all industries in Minnesota. Of the respondents to the most recent survey, 87 percent represented privately held companies and 13 percent represented public companies.