An index that measures the health of mid-size businesses dropped to 100.7 in July from the prior month’s reading of 109.1, showing a slowdown in economic activity in mid-June that began as the country struggled with a surge of new coronavirus cases.
The RSM US Middle Market Business Index, done in partnership with the U.S. Chamber of Commerce, has been tracking the quarterly health of midsize firms since early 2015. RSM and The Harris Poll survey 700 executives at medium-size firms across many industries. Beginning in March, the firms began collecting economic-related data to measure the effect of the COVID-19 pandemic on businesses. The survey was in the field from July 8 and July 23 and had responses from 404 participants. Any reading above 100 indicates expansion; the index reached its all-time low of 87.7 in March as the pandemic took its grip on America and many businesses entered a lockdown.
“Following the burst of initial optimism that came with the reopening of the economy in May and early June, overall business conditions began to ease and then recede,” said Joseph Brusuelas, chief economist at RSM US. “This decline implies that midsize firms remain mired in recession as the pandemic has caused a series of pauses, pullbacks and shutdowns across major parts of the economy.”
Midsize businesses are generally those with annual revenues of between $5 million and $1 billion. They represent about a third of the nation’s gross receipts and a majority of its jobs. Economically, they tend to lag behind multinational companies whose stocks are the household names of the equity markets.
The survey found a decrease in the number of executives expecting the economy to improve and those with plans to bring on more workers.
Economic reports of late have tended to show disparate results but a pattern is emerging of a pullback since the latest round of coronavirus cases began cropping up following reopenings in many states. While Walmart reported strong quarterly earnings Tuesday, driven by a 97% increase in online sales, the retailer noted its in-store sales saw a boost from customers who had received a stimulus check as part of the government’s response to the crisis. Congress is currently stalled on another stimulus package and some benefits, including enhanced unemployment payments, have expired.
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“Stimulus was definitely impactful to the consumer in the second quarter, and we’re watching what’s going on in Washington, and how we’re going to progress with a new stimulus package,” Walmart CFO Brett Biggs said. “I think certainly it would be helpful for consumers.”
The chamber has called for more action from Washington to address the economic effects of the virus. “Concerns linger for businesses as they navigate an uneven pattern to reopening, and while those concerns manifest differently across regions and industries, the most important thing we can do is make sure business leaders have the support they need to continue to weather the uncertainty,” said Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce. “We need consistent public health guidance, temporary and targeted financial assistance, and liability protections for businesses that are following public health guidelines.”
One bright spot Thursday was a report on housing starts, which saw them surge 22.6% to an annualized 1.46 million units. Housing has been an especially strong sector during the pandemic, as buyers take advantage of record-low mortgage rates.