Sioux Falls CEO survey: Optimism hits lowest level since 2017

Jan. 14, 2019

There aren’t as many CEOs cheering on the local and national economies – but they aren’t spelling all doom and gloom either.

The most recent quarterly SiouxFalls.Business CEO survey done in partnership with the Augustana Research Institute found almost all of the nearly 50 Sioux Falls leaders responding still considered conditions in their business good or excellent.

The survey was conducted in mid-December.

There was some moderation in the CEOs’ degree of enthusiasm, with 21 percent reporting excellent conditions – the lowest number since the survey began in the spring of 2017 – and 75 percent reporting good conditions. Two percent reported fair conditions, and 2 percent reported poor conditions, which is worse than at the end of the third quarter but on par with the end of the second quarter of 2018.

One year ago, 49 percent reported excellent conditions, and 47 percent reported good conditions.

“The dreaded ‘R’ word seems to be on the lips of every TV pundit these days, so it is difficult to parse whether the big shift in the survey results from excellent to good business conditions reflects reality or merely prevailing fears, a shaky stock market and an increasingly troubling yield curve,” said Robert Wright, the Nef Family Chair of Political Economy at Augustana University.

“The nation’s central bank must continue walking a tightrope. If it raises rates too much, too fast, it could induce a recession. But if it moves too little, too slowly, inflation could exceed its targets enough to induce staglation – low growth with high inflation like the 1970s.”

Wright pointed out that six additional CEOs were able to raise their prices slightly in the fourth quarter, with 58 percent reporting slight or significant price increases.

Four in 10 CEOs said they expect above-average business activity for their organizations in the next three months, while 55 percent expect average activity, and 4 percent project below average.

That’s slightly softer than in the prior quarter but not by much.

“It appears people are less optimistic, even though I suspect business conditions are excellent in general,” said Tony Ratchford, who leads Keller Williams Realty Sioux Falls.

Home sales, which dropped 31 percent in the city year-over-year in December, reflected “uncertainty and concern about what may happen going forward,” he added. “Although all the data show the economy in superb condition.”

Most Sioux Falls CEOs are planning for capital expenditures, with 17 percent estimating above-average spending in the next three months, 68 percent expecting average spending and 13 percent projecting below-average spending.

When it comes to hiring, 17 percent of CEOs expect above-average activity, 70 percent expect average activity, and 11 percent expect below-average activity.

Both are tracking slightly behind last quarter as well as the same time a year ago.

As usual, CEOs remain more positive about the Sioux Falls economy than the national one. Forty-three percent said the business climate in Sioux Falls is excellent, 55 percent called it good, and 2 percent said it was poor.

Respondents were less favorable toward the national economy, with 13 percent saying it’s excellent, 62 percent calling it good and 26 percent calling it fair.

“It will behoove investors and business leaders to pay particularly close attention to important leading economic indicators, especially the slope of the yield curve, in 2019,” Wright said.

“The yield curve, the difference between short- and long-term interest rates, has been flattening, and part of it has even inverted, raising recession expectations. A national recession, however, need not affect the Sioux Falls area much, especially if it is shallow and short-lived.”

2019 outlook: Record year’s momentum expected to continue; 2020 ‘is a question mark’

Sioux Falls CEO survey: Optimism hits lowest level since 2017

There aren’t as many CEOs cheering on the local and national economies – but they aren’t spelling all doom and gloom either.

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