More than half of business service providers in Minnesota — including architects and engineers — expect a decline in consumer spending and corporate profits in the next four quarters, according to a new survey.
The survey, released Monday by the Minnesota Department of Employment and Economic Development and the Federal Reserve Bank of Minneapolis, is based on a random sample of Minnesota business service companies. Conducted in August and September, the survey received 148 responses.
In a press release, DEED and the Minneapolis Fed said the survey offers “a compelling glimpse into economic conditions because these businesses provide their services to other businesses across the full range of industries in the economy.”
Among the takeaways: 52% of responding firms expect declines in overall consumer spending and corporate profits in the coming year. But the outlook is mixed when it comes to their profits. On that question, 49% foresee a drop, 34% expect no change and 17% anticipate an increase in profits.
“Demand for our services has been higher than normal,” one unnamed broadband provider said. Another anonymous respondent, however, said business is down by 65%. Conditions are “brutal. I am hanging on by threads,” the respondent added.
Karen Lu, president of the American Institute of Architects’ Minnesota chapter, said the survey results underscore the need for Minnesota to pass a bonding bill for public works projects throughout the state.
“At AIA Minnesota, we can’t emphasize enough the importance of the bonding bill,” Lu said in an interview. “There is broad bipartisan support and obviously support from AIA Minnesota, our companies, architects and designers.”
“This is something we think can help kick-start the community and address some of those numbers” from the survey, Lu said.
Among other things, the survey finds that businesses are still unable to shake off the impact of COVID-19. Half of the respondents say employee productivity is down because of the pandemic, and 57% report a pandemic-induced decline in revenue.
Looking ahead, about half of responding businesses said they expect “normal operations” to be back in six months. However, one in five (18%) said it won’t be business as usual six months down the road.
“While Minnesota is showing promising signs of economic recovery, the pandemic continues to present unprecedented challenges for businesses,” DEED Commissioner Steve Grove said in a statement. “We’re continuing to work with Minnesota businesses as we take common-sense steps to slow the spread of COVID-19 while we navigate the coming months of recovery.”
Also in the survey, most respondents believe workers will be available for open positions. More than eight in 10 of the respondents expect their labor availability to either stay the same (67%) or increase (14%). On a related note, 75% of respondents expect their own employment level to remain unchanged (65%) or increase (10%).
Businesses are roughly split down the middle on the question of inflation. Forty-nine percent expect inflation to stay the same, while 46% expect it to go up.
DEED and the Federal Reserve Bank of Minneapolis have conducted this survey annually since 2006. The DEED website has more details on the 2020 Survey of Minnesota Business Services Firms.
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