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Middle Market Survey: Business Index Significantly Improves as Economic Recovery Accelerates

According to a recent survey, the RSM US Middle Market Business Index (MMBI), increased in April 2021, indicating the U.S. economy is improving as the prospect of an economic boom, rising revenues and surging net earnings this year more than offset evidence of pricing pressures. This is the best reading for the index since the first quarter of 2020, the last quarter prior to COVID-19 pandemic shutdowns. The index is part of the MMBI for the second quarter.

"The undeniable strength of middle market businesses is best illustrated by the strong jump in current economic circumstances over the past two months from 34 percent of survey respondents indicating an improvement in overall economic conditions in February to 49% in April," said Joe Brusuelas, RSM US LLP chief economist. "Further highlighting the resilience of the American middle market, nearly half of the respondents noted an improvement in gross revenues (47 percent) and net earnings (48 percent) in the most recent quarter, occurring in conjunction with a 6.4 percent increase in gross domestic product. Middle market businesses are indicating great optimism moving forward, and we're expecting an extraordinary economic boom as the recovery continues."

With the significant improvements achieved in the most recent quarter, the economic outlook among middle market executives is also increasingly positive. Looking ahead to the next six months, 74 percent of respondents stated they expect the general economy to improve, while 72 percent indicated they expect an improvement in gross revenues and 71 percent anticipate growth in net earnings.

Though pricing pressures are a concern, 62 percent of respondents stated they intend to engage in productivity-enhancing capital expenditures over the next six months – in contrast with the 35 percent who said they did so over the recent quarter.

Additionally, as the economy continues to reopen, 69 percent indicated in April that they paid higher prices for goods this quarter compared to the previous quarter and only 43 percent stated they received prices downstream this quarter. Surging demand will continue to constrain supply chains, and a record 82 percent of respondents said they expect to pay more for the inputs used in their operations over the next six months.

It is important to note that while prices are increasing following steep declines during the pandemic last year, they are now moving back toward pre-pandemic levels, and the majority of survey respondents are not facing significant problems linked to inflation.

"Encouraged by vaccine distribution and loosening restrictions, there is a great amount of optimism from the middle market as business comes back and leaders see improving conditions for a great resurgence," said U.S. Chamber Executive Vice President & Chief Policy Officer Neil Bradley. "The middle market has shown tremendous resilience and has been crucial in leading the country's economic recovery. The Chamber is prepared to work closely with middle market leaders to continue to navigate important legislative and policy issues to get back to business."

The survey data that informs this index reading was gathered between April 7 and April 28, 2021.

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