Reading the Tea Leaves: Local business leaders express guarded optimism on the economic environment

In a U.S. presidential election season that brings regular gloomy predictions with the nightly news, projections by area business leaders in the 2024 Economic Growth Series survey are looking up.

Some of the optimism can be tied to an easing of recession fears that gripped the region and the nation in 2023.

This year, only 17% of survey respondents predict a recession will come this year, and 32% don’t predict a recession at all. In the 2023 survey, 44% anticipated a recession in the same year, with an additional 15% predicting one in 2024.

Among this year’s respondents, 24% said their confidence in the local economy has increased compared to a year ago – up nearly 5 percentage points year-over-year. Some 16% said their confidence had decreased, compared with 23.5% last year.

Respondents were also asked to declare their outlook for their own business sector, and 45% said they expect their sector to improve. An additional 39% reported they anticipate it will stay the same, while only 10% anticipated their business sector would worsen.

This outlook, too, is brighter than in 2023, when 22% expected their sector’s outlook to worsen.

Roughly a quarter of respondents plan a capital raise this year.

Additionally, 60% of respondents said they expect their 2024 net income to improve from the year before, up 4 points from the year before. The percentage of respondents who expected their net income to worsen was cut in half to 7.5%.

The improvements in outlook show up here and there, like a beam of morning light finding its way in through the window blind.

David Mitchell, a professor of economics and the director of both the Bureau of Economic Research and the Center for Economic Education at Missouri State University, said inflation is responsible for some of the seeming optimism of the survey results.

“As you know, sales is basically price times quantity,” he said. “Even if prices are going up but the quantity is not changing or the quantity is declining slightly – if there’s a decline in how many hamburgers or T-shirts you’re selling – you could actually see income going up.”

Respondents’ anticipated improvement in their business sectors were not a surprise to Mitchell.

“The thing people are really pessimistic on is the inflation aspect,” he said. “These questions are dealing with net income and things of that nature. If your revenue increases and you’re making fewer hamburgers, it’s possible that your profits are going to go up as well. You don’t have to buy patties, buns or labor.”

Inflationary profits may indeed be a factor. However, the annual Survey of Consumers conducted by the University of Michigan shows that nationally, consumer sentiment was at 69% in May 2024 – 20% higher than a year ago and 40% above a historic low in June 2022. Recent results are trending downward, however, with an 8-point decrease from the previous three months and a five-month low. Long-run inflation expectations remain elevated, the University of Michigan survey states.

Inflation worries
Mitchell said consumers are concerned about inflation.

“Policymakers have been saying it’s going down, but people are saying, ‘Hey, prices are still going up,’” he said. “Politicians are telling them prices are declining, but prices are not declining. They’re going up.”

There is continual shock among consumers, he noted.

“People still have not gotten used to higher prices yet, so every time you go to the grocery store, it’s a shock to the system,” he said.

Only 15% of respondents in the SBJ survey reported their businesses had not been impacted by inflation.

Daniel Ponder, the L.E. Meador Endowed Chair of Political Science at Drury University, writes about presidential politics. He agreed with Mitchell that inflation looms large in consumers’ minds. “Ideas about inflation tend to be fairly negative and fairly persistent, even if it’s coming down,” he said.

He said the level of optimism apparent in some of the Economic Growth Series survey results surprised him. On the national scene, people’s outlooks about the economy are strongly tied to their political views.

“People just tend to see the economy in a different light depending on partisanship,” he said, adding that there are a lot of indications of a deeper, more stubborn partisanship in this presidential election year.

As the economy begins to improve, some partisans believe it’s because of Democratic President Joe Biden’s leadership. Their counterparts believe it’s due to anticipation of a return of Republican President Donald Trump. Gone are the days, seemingly, when presidential politics are not the main determiner of outlook.

“Economics and politics have sort of been meshed,” Ponder said, noting there has been intense polarization for the last 10 years.

Brighter outlook
At a June 4 Springfield Business Journal event to release the results of this year’s Economic Growth Series, members of a sponsors’ panel said the area’s optimism should be a draw.

“If you live in an area, then you’d better be happy with the area that you live in, or you should move,” said Jeff Childs of SVN/Rankin Co. “It doesn’t matter where you are in the cycle of the market; there’s always an opportunity.”

He added that he works hard to find those opportunities for the people who choose to work with his company.

“On a national level, it’s always somebody mad about something, but on a local level, what you see is the people that you see every day,” he said. “You’re trying to be a good neighbor and be a good friend.”

Childs said that outlook is a major reason that people are drawn to southwest Missouri.

“We’re optimistic by nature,” he said. “We take care of our own problems. We don’t look to everybody else to solve a problem. We look to ourselves, and we help each other.

“I think that’s a real selling point in our marketplace, and one that we need to be proud of, quite frankly.”

Mick Nitsch of Regent Bank, another series sponsor, said that as the fastest-growing metro area in the state, the region has wind in its sails. Indeed, the U.S. Census Bureau reported in May that roughly 15,000 new residents moved to the area between 2020-23 for a growth rate of over 3%.

“Bankers can extend a little bit more flexible terms and access to capital and encourage development in our city, and I think that makes a huge difference,” he said.

He added that he travels to other parts of the country, and they aren’t as fortunate as Springfield.

“We should feel blessed that we live in such a great place, and people are moving here and we’re growing so quickly,” he said.

John McNabb of Sapp Design Associates Architects Inc., also a series sponsor, said one thing that helps keep Springfield optimistic is that while locals have experienced cost increases, the overall cost of living is low compared to other major cities.

The Economic Research Institute places Springfield’s cost of living 19% below the national average and ranks the city number 5,599 out of 5,673 U.S. cities for its cost of living. The city’s cost of living is 5% lower than the state’s.

“As these new pressure points arise – because they’re rising nationally – I think it’s more stressful to some of the bigger cities because their cost of living is already so much,” McNabb said.

Chelsey Taylor, who helps to coordinate the annual HBA Home & Outdoor Living Show as the event coordinator for the Homebuilders Association of Greater Springfield, said the outlook is bright in her industry, with the HBA experiencing a large growth in membership.

“The builders are busy,” she said. “I don’t know how to explain it, but they’re all busy. If anyone comes to them to build a house, usually they’re having to wait a little while.”

Mitchell said Springfield tends to weather economic storms pretty well.

“A lot of it has to do with the fact that the local economy is pretty well diversified,” he said. “We have an economy that’s relatively balanced compared to the U.S. as a whole. That has a tendency to insulate a lot of the Springfield, Missouri, metro area from a lot of the big issues that are going on in the rest of the country.”