Business Optimism Soars

More Minnesota companies plan to hire, increase capital outlays, and invest in research and development.

Fifty percent of Minnesota’s business leaders believe the state’s economy will strengthen in the next three months. That’s up from 39 percent in the previous quarter and more than double the percentage who voiced such optimism six months ago, according to Twin Cities Business’s 2012 second-quarter economic indicator survey. 

Of the 888 businesses from across Minnesota participating in the survey, 49 percent also believe that the national and international economies will improve during the second period, up from 32 percent in the previous quarter. Such optimism comes as Minnesota businesses invest more in their operations and increase overall production. 

Planned investments in capital outlays and research and development have risen in each of the last three quarterly surveys. For the current quarter, 38 percent of Minnesota businesses plan to increase their capital outlays, while 28 percent plan to boost research and development spending. Compared with three quarters ago, about 30 percent more businesses will increase capital outlays, and 87 percent more businesses will boost research and development expenditures.

Nearly 50 percent of respondents to the second-quarter 2012 survey also plan to increase their companies’ production or service delivery levels—up from 46 percent in the previous quarter, and up 25 percent from the last two quarters of 2011. 

Optimism about the economy is continuing to stimulate hiring. The survey found 40 percent of responding businesses plan to add full-time employees this quarter—up from 37 percent who planned to increase headcount during the first quarter, and only 29 percent during the last quarter of 2011. (See the tables at right for Minnesota industries most actively hiring this quarter.) 

Meanwhile, anticipated layoffs are the lowest since the survey began four quarters ago. Only 5.5 percent of respondents expect to reduce full-time headcounts in the next couple of months, compared with 8 percent in the two preceding quarters, and 11 percent in the third quarter of 2011. 

The only troubling sign from the survey is that 29 percent of respondents expect it to be more difficult this quarter to find qualified talent. This marks the third consecutive quarterly increase in the percentage of companies expressing concerns on this issue. Only 7 percent of respondents believe finding qualified talent will be easier. 

This issue also came up frequently when leaders were asked the following: “What do you anticipate as your biggest business challenge within the next three months?” One answer in particular fit the common theme expressed by others: “Finding qualified employees who are willing to work and have a good work ethic.” Positions of concern were software engineering, long-haul drivers, machinists, entry-level personnel in a 24/7 environment, information technology, and website development.

About 26 percent of responding businesses plan to raise prices—about the same level as in the first quarter. 

Industries expecting significant increases in operating margins this quarter are Entertainment and Hospitality (41 percent of businesses responding from this sector expect an increase), Banking and Finance (41 percent), Biotech/Med-tech/Pharma (35 percent), and Information Technology/Software/Telecom (33 percent). Industries with the highest percentage of leaders saying they’ll see a drop in operating profit margins this quarter are Health Care Delivery and Services (26 percent), Transportation (22 percent), and Retail (22 percent).

 

Methodology

Twin Cities Business conducts this survey quarterly to provide a look at business planning and sentiment among leaders across all industries in Minnesota. It is the only survey of its kind. The tables on the next page
provide more information on the survey’s findings.

An e-mail link to an online survey was sent to 16,244 Minnesota businesses leaders in mid-March, and reminder e-mails were sent the following week to those who had not completed the survey. The Minnesota Chamber of Commerce provided some of the e-mail addresses used in this outreach. As of March 29, 888 businesses responded, resulting in a 5.5 percent net response rate. Of those who responded, 86 percent represented privately held businesses and 14 percent publicly traded ones. 

Related Stories