Top-line middle market business sentiment eased to 125.1 in the first quarter of the year from 130 in the final quarter of the last year.
Despite the decline in overall sentiment, the current reading reflects strong business conditions across the real economy. Meanwhile, Russia's invasion of Ukraine, which occurred following the conclusion of the sampling period for the first quarter, sheds uncertainty on middle market business sentiment in the second quarter.
"This quarter’s Middle Market Business Index continues to demonstrate that businesses and job creators remain heavily burdened by inflation, labor shortages, snarled supply chains and continued COVID-19 disruptions. For our economy to reach its potential, expanding the labor force and limiting inflation must be a top priority for policymakers throughout 2022," said U.S. Chamber Executive Vice President and Chief Policy Officer Neil Bradley.
Summary
THE OMICRON VARIANT and rising prices have taken a toll on both overall economic activity and consumer and business confidence over the past three months, according to the latest proprietary RSM US Middle Market Business Index.
Top-line middle market business sentiment eased to 125.1 in the first quarter of the year from 130 in the final quarter of last year. Both of those figures were below the all-time high of 143.8 posted in the third quarter of last year.
Despite the decline in overall sentiment, the current reading reflects strong business conditions across the real economy and is perhaps the first sign of relief inside the index on the risk to the outlook posed by inflation.
However, Russia’s invasion of Ukraine, which occurred following the conclusion of the sampling period for the first quarter of the year, will likely roil global supply chains and cause the price of energy to rise in the near term. Thus, it is probable that this development and all that follows may damp middle market business sentiment during the second quarter of the year.
Two key components in the current quarter underscore expectations around gross revenues and net earnings—prices received and compensation. Both eased during the first three months of the year, providing some relief to firms scrambling to address a shortage of goods and labor.
While it is too early to call a top to the current surge in inflation, any relief from pricing pressures and the scarcity of labor is welcomed by middle market firms.
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