The RSM US Middle Market Business Index (MMBI), presented by RSM US LLP (“RSM”) in partnership with the U.S. Chamber of Commerce, increased to 131.8 in the fourth quarter from 130.4 in the prior period on a seasonally adjusted basis. The MMBI survey results reflect robust business conditions in the middle market, driven by strong household spending, solid fixed business investment and a supply-side tailwind. The data is based on responses from 404 senior executives at middle market firms in a survey conducted by The Harris Poll from Oct. 1 to Oct. 22, 2024, before the presidential election on Nov. 5.

“Middle market business conditions remain stout and are almost certain to improve amid expectations of lower taxes, reduced regulation and a strong economy,” said Joe Brusuelas, chief economist with RSM US LLP. “We anticipate a move higher in the top-line index in the first two quarters of next year as firms recalibrate expectations based on a lighter regulatory framework and an expansionary fiscal policy.”

Firms Report Solid Business Performance and Increasingly Optimistic Outlook

The MMBI survey shows that respondents’ overall sentiment on the economy improved modestly in the most recent quarter. Forty-four percent of middle market executives noted an improvement, and 62% said they expect a general improvement over the next six months.

The results also indicate the outlook on gross revenues and net earnings remained solid, with half of the respondents indicating gross revenues improved and 45% reporting improved net earnings. Looking ahead through the first half of next year, 68% of executives expect further improvement in gross revenues and 62% anticipate improved net earnings. RSM expects both forward-looking figures to increase with probable tax cuts and reduced regulatory risk in 2025.

The MMBI report explains that likely changes to the tax code on business fixed investment could also spur improved outlays on capital expenditures. In the current quarter, 44% of respondents reported increased spending on software, equipment and intellectual property, and 55% said they intend to increase spending on those items.

“Middle market businesses continue to demonstrate remarkable resilience and adaptability, driving robust growth as we close out the year,” said Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce. “The U.S. Chamber is counting on our newly elected officials to match that optimism with policies that will support and accelerate economic growth over the next decade.”

Tight Job Market Persists as Firms Increase Compensation; Pricing Challenges Continue

With the labor market remaining tight and a continued premium on skilled workers, it is unsurprising that 54% of survey participants reported increasing compensation and 64% indicated they expect to do so in the new year.

Only 40% of firms said they had increased hiring. Fifty-six percent of respondents indicated they intend to increase the pace of hiring, but the MMBI report notes the ongoing shortage of workers will make that difficult.

The rising cost of doing business also continues to challenge the middle market, which is underscored by the 68% of executives who said they paid more for goods and services and the 71% who said they anticipate paying more over the next six months. Only 51% of respondents said they passed through higher costs.