Economic Optimism Wanes in Minnesota

Business leaders plan to scale back this quarter due to politics, taxes, and other factors

MINNEAPOLIS--(BUSINESS WIRE)--Minnesota’s economy is regressing after pessimism about its business climate more than doubled from one year ago at this time, according to Twin Cities Business’s quarterly economic indicator survey completed by 571 businesses across the state in mid-December.

Results from the survey – which asks business leaders about their plans for the next three months – are used to tabulate the Minnesota Economic Outlook Index. For the first quarter of 2013, the index dropped to 49.9, down from 51.2 in the fourth quarter of 2012, 53.2 in the same period one year ago, and an average of 53 during all of 2012. An index above 50 indicates economic expansion; below signals contraction.

The current index reflects a slight scaling back of early 2013 budget plans by many business leaders, and may be temporary. The survey behind it was conducted before ‘fiscal cliff’ fears were at least temporarily alleviated, but after November’s re-election of President Barack Obama and closer to home, elections that led to a DFL-controlled legislature. Concerns about these developments, the prospect of increasing government regulations and taxes, and the overall dismal state of politics in general were voiced most frequently when business leaders shared their greatest challenge for this quarter.

The other most-common challenges had to do with growing revenues, managing growth and taking on increasing competition; and finding qualified talent while improving retention, focus and productivity among current employees.

Twin Cities Business’s February edition, on newsstands the last week of January, contains more details (an advance copy of the story is available online at http://bit.ly/106a3AQ). Among them: The percentage of respondents who expect business conditions in Minnesota to worsen by March 31 (25%) is more than twice what it was a year ago and is the highest it has been in four quarters, while the percentage of respondents expecting conditions to improve (30 percent) is the lowest during the same period. Hiring is also expected to slow this quarter, while expectations of increased capital expenditures, higher revenues, and better operating profit margins all dropped to their weakest levels in four quarters. (Tables showing how these findings compare with previous quarters are available at http://bit.ly/SeuM6s; for a look at how industries and counties compare, go to http://bit.ly/XklLpR).

Twin Cities Business’s Minnesota Economic Outlook Index is the only leading indicator of what business leaders across the state are planning for the immediate quarter. The current index is a result of a survey asking 11 questions of 15,750 Minnesota business leaders. The Minnesota Chamber of Commerce provided some of the e-mail addresses used in this outreach. A total of 571 businesses responded.

About Twin Cities Business
Minneapolis-based Twin Cities Business publishes news, analysis, features, and commentary about the state’s most interesting business issues, leaders, and opportunities daily at TCBmag.com, twice weekly in its “Briefcase” e-newsletter, and monthly through the award-winning Twin Cities Business magazine.