Minnesota Businesses Ramp Up Investment Plans

Leaders are extremely optimistic about national and global economies in 2017 and plan to increase hiring, R&D and capital expenditures.
Minnesota Businesses Ramp Up Investment Plans

Leaders are extremely optimistic about national and global economies in 2017 and plan to increase hiring, R&D and capital expenditures.

As they look to the months ahead, leaders from across the state are the most optimistic they’ve been about business conditions nationally and globally in nearly five years, according to TCB’s Quarterly Economic Indicator (QEI) study of leadership plans for the first quarter ending March 31.

Half of the 332 who responded to this period’s questionnaire say they expect conditions will improve; 11 percent expect they will worsen and 39 percent believe they’ll stay the same. Those are the highest “improve” and lowest “worsen” percentages since this quarterly analysis began in mid-2011.

Meanwhile, optimism about Minnesota’s economy in the months ahead also is up, but not nearly as much as views on the national and global economies. Thirty percent of respondents say they expect Minnesota’s economy will improve—good news, given this percentage was in the teens and twenties since the fourth quarter of 2015, but still trailing a 22-quarter average of 32 percent.

Finding qualified talent remains a major concern. In previous quarters, at least 1 percent of respondents thought it would become easier to find qualified employees in the months ahead. For the first time, less than 1 percent indicate this going into 2017. Meanwhile, 51 percent expect the prospects to remain the same, while 48 percent say they believe they will get even more difficult.

About the survey

Every three months, Twin Cities Business sends to more than 15,000 business leaders throughout the state the same set of questions, asking them about plans and expectations for the next three months. This issue’s survey, conducted at the end of December, provides insight into the first quarter of 2017 ending March 31.

Wages are expected to rise at 47 percent of the companies responding to the survey; only 1.5 percent plan to decrease wages, while 51 percent plan to keep them at the same level.

Production levels are expected to rise at 48 percent of the responding businesses—this is up 35 percent from last quarter, and up 14 percent from one year ago. More than half of respondents also expect revenue will increase this quarter, and a record 38 percent expect operating profits will improve, while a record low percentage of only 10 percent expect profits will fall.

This may help explain why a record high percentage of 27 percent of respondents plan to increase spending on research and development (up 43 percent from last quarter and 19 percent from one year ago), and 37 percent plan to increase spending on capital expenditures (up 59 percent from the fourth quarter and 10 percent from the first quarter of 2016).

These findings of anticipated investment increases are on track with other reports issued within the first week of 2017.

  • The Institute for Supply Management (ISM) on Jan. 3 reported that its purchasing managers index rose to 54.7 percent in December, hitting its highest level in two years. This indicator has signaled growth in nine of the past 10 months. New orders and production increased in December, as did hiring, ISM says.
  • Creighton University on Jan. 4 released its monthly Mid-America Business Conditions index for the fourth quarter at 53.1, up from 46.5 reported in November. Below 50 indicates economic contraction; above indicates growth. December saw the second consecutive monthly increase in this index, which found hiring, new orders, exports and inventory levels improved in manufacturing plants across Minnesota, the Midwest and the nation.
  • The Wall Street Journal Jan. 3 reported that after years of stock buybacks and hoarding cash, U.S. companies are moving to spend on factory and equipment upgrades. TCB’s quarterly study also asks respondents to tell us their greatest business challenge in the fourth quarter. Among the 254 written responses, finding good employees topped the list, followed by concerns about regulation and taxes. Here are a few of the responses:
  • “Finding qualified employees; we have eight open positions that we have been trying to fill for months. We are in a rural town 50 miles west of the Twin Cities and it is difficult to find employees.”
  • “Insurance/benefits for employees; costs have risen more than 50 percent in the last three years.”
  • “Increasing regulation, high taxes. Keeping costs down. Trying to convince employees to come to Minnesota.”
  • “Capital flight out of Minnesota thanks to Mark Dayton’s idiotic tax policies.”
  • “Cost of goods. If import tariffs are increased, it could have a negative impact on our business.” Asked if there was anything else they would like to add, 41 people responded. Here are a few of their responses:
  • “The City of Minneapolis is strongly driving away growth companies, at the same time our state is gaining a strong reputation for high costs.”
  • “The Trump election has created a lot of optimism amongst our customers. It will be good for us!”
  • “We increased the number of products available to our clients recently, and plan to do so in 2017, due to what we believe will be a much better business environment. Essentially, business will be welcomed, not vilified.”
  • “Minnesota is an attractive state for its talent pool and culture, but unattractive in terms of being small-business friendly. As a result, we are relocating our headquarters and employees.”
  • “The state’s Angel Tax Credit has been incredible for us—it helped us raise capital from investors in Minnesota and from out of state, and that has meant more jobs here.”

Another question was whether those businesses that plan to expand will do so in Minnesota. This quarter, 56 percent indicated they would, down slightly from 59 percent last quarter and about even with one year ago at this time; 24 percent said they wouldn’t and 20 percent answered “unknown.”

Gov. Mark Dayton’s Approval Rating Drops

27.8 (down from 35.1% last quarter) The governor’s approval rating of 27.8 percent is down 15 percent from a year ago at this time. The percentage of those who disapprove of the governor’s performance increased to 58.6 percent from 54.3 percent last quarter.


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 15,729 Minnesota business leaders in late December 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 Dec. 30, 332 leaders
responded, resulting in a 2.1 percent net response rate.


Percent of 332 Minnesota businesses, by industry, that anticipate increases in these areas during the first quarter of 2017.