Economic Optimism’s Tepid Return

Economic Optimism’s Tepid Return

Business leaders are less negative than they have been in recent quarters, but spending is expected to remain flat through the rest of the year.

After six consecutive quarters of growing pessimism about the economy, business leaders across Minnesota are expressing a slightly more positive outlook for the remainder of the year, according to TCB’s Quarterly Economic Indicator (QEI) study of leadership plans for the fourth quarter ending Dec. 31.

When it comes to Minnesota’s economy, 17 percent of the 189 companies participating in the study expect conditions will improve this quarter—a rise over last quarter’s 13 percent, but still well below a trailing 21-quarter average of 33 percent. Conversely, 30 percent of respondents still expect conditions will deteriorate. That’s down slightly from last quarter’s 31 percent, which marked the sixth consecutive quarterly increase in this area.

Gov. Mark Dayton’s Approval Rating

(up from 26.4% last quarter)

The governor’s approval rating of 35 percent is down slightly from 38 percent a year ago at this time. The percentage of those who disapprove of the governor came in at 54 percent, down from 63 percent last quarter but up from 47 percent at the end of 2015.

When it comes to global economic conditions, 18 percent anticipate improvement between now and Dec. 31—up nicely from only 11 percent last quarter. Perhaps of greater significance, fewer business leaders expect conditions to worsen: 37 percent, compared with 45 percent last quarter (which also marked the seixth consecutive increase in this area).

Conducted in the last two weeks of September, TCB’s most recent quarterly indicator study found more leaders also anticipate higher revenues and operating profit margins in the fourth quarter. Production levels, R&D spending and hiring activities are expected to remain about the same, while capital expenditures are expected to drop again.

Only 23 percent of respondents plan to increase capital expenditures during the period—the lowest percentage in this area since before the survey began in mid-2011. This also compares with 37 percent of survey respondents who planned to spend more one year ago, and a trailing average of 34 percent over the 21 quarters in which the survey has been conducted. Meanwhile, 62 percent say they’re keeping spending steady—also the highest percentage yet seen from the study.

Anticipated layoffs remain higher than usual, with 11 percent of respondents saying they’ll cut headcount this quarter. That’s down slightly from the third quarter (12 percent), but represents a 37 percent increase from one year ago.

Some 30 percent of businesses plan to increase hiring by Dec. 31, the lowest level since the first quarter of 2011. This also compares with 34 percent who planned to hire more people one year ago, and a trailing 21-quarter average of 36 percent. This marks the third consecutive quarter of reduced hiring plans across the state.

TCB’s quarterly study also asks respondents to share what they expect to be their greatest business challenge in the fourth quarter. Finding good employees topped the list among the 146 written responses. Other responses that represented common concerns included:

  • “Health care renewal, regulation and the Minnesota anti-business attitude.”
  • “My biggest concern is the [presidential] election. Neither candidate is right for the job. Neither is good for small business.”
  • “Keeping costs down with the increasing costs of doing business. These include compliance with ever-increasing regulation, higher taxes and higher health insurance costs.”
  • “Maintaining revenue. This election cycle has everyone in a very pessimistic mood, which is not helping drive revenue.”
  • “Generating new business and working with clients’ reduced budgets.”

Another question was whether those businesses that plan to expand will do so in Minnesota. This quarter, 59 percent indicated they would, up from only 47 percent last quarter and about even with one year ago at this time; 24 percent said they won’t, up from 22 percent sho said they won’t last year; and 18 percent answered “unknown.”

TCB’s QEI study also asks, “What is your company’s most significant driver of health care costs?” Increased premiums topped the list, followed by an aging workforce and increased claims.

About the Survey
Since mid-2011, Twin Cities Business has sent more than 9,000 business leaders throughout the state the same set of questions every quarter, asking them about plans and expectations for the next three months. This issue’s survey, conducted at the end of September, provides insight into the fourth quarter of 2016 ending Dec. 31.


Twin Cities Business conducts its survey quarterly to provide a look at business planning and sentiment among leaders across all industries in Minnesota. An email link to an online survey was sent to 9,178 Minnesota business leaders in late September, and reminder emails were sent the following two weeks to those who had not yet completed the survey. The Minnesota Chamber of Commerce provided some of the email addresses used in this outreach. As of October 3, 189 leaders responded, resulting in a 2.1 net response rate.

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