M&T COMMERCIAL BANKING DIVISION€¦ · Q1 2013 Q1 2014 Q1 2015 Q1 2016 Middle Market Highlights...
5
6% 3% 6% 22% 10% 5% 30% 54% 66% 52% 37% 47% 59% 24% 0% 10% 20% 30% 40% 50% 60% 70% Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 11% 9% 5% 6% 4% 2% 4% 21% 29% 32% 32% 31% 32% 31% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Middle Market Highlights • 17% of Middle Market firms (sales $10-$500 million) feel the economy has improved over the past six months, down significantly from the 54% reading a year ago. 29% say the U.S. economy has weakened, up from only 4% a year ago. • 24% of respondents expect U.S. economic growth to accelerate over the next six months, while 30% expect the economy to slow. • Unit sales expectations declined modestly, with a net 35% expecting sales to accelerate in the next six months, compared to 47% last year. • Capital spending plans were largely unchanged, with a net 35% expecting to increase capital expenditures. • Hiring expectations remain steady, with 31% of respondents planning to hire additional employees in the next six months, versus only 4% that plan to reduce employment levels. • Low energy prices are expected to be a boon for most firms, with a net 36% expecting low prices to have a positive impact on their businesses. Regional Differences • 54% of metro NYC firms expect their regional economy to out- perform the U.S. during the second half of 2015—versus 46% for the Mid-Atlantic, 32% of Pennsylvania and 26% of Upstate NY respondents. Commercial Real Estate • 19% say the U.S. economy has improved over the past six months, down from 59% a year ago. 17% say the economy has decelerated, up from only 5% a year ago. • 24% of CRE firms expect the national economy to improve in the next six months, down from 69% a year ago. Some respondents noted concern over the uncertain path of fiscal and monetary policy. • Expectations for CRE industry performance declined, with a net 23% expecting conditions to improve, versus a 61% reading in Q1 2015. • Cap rates and occupancy rates are both expected to rise moderately. • 42% of respondents expect rental rates to rise, down from 54% in Q1 2015. 10% expect rental rates to fall. “How do you expect the national economy to perform over the next six months?” Middle Market Companies Q1 2016 Economic Outlook Survey Results Economic Pessimism on the Rise Despite Continued Strength in Business Fundamentals The latest poll shows that mid-sized firms are concerned about financial volatility and signs of a weakening U.S. economy, but continue to hire, invest, and grow revenue at rates consistent with the expansion norm. Only 1-in-4 middle market companies expect national economic conditions to improve over the next six months, versus 30% who expect conditions to deteriorate. Commercial real estate (CRE) firms were similarly pessimistic, with a net 3% forecasting that the economy will downshift. Conversely, company sales growth expectations declined only modestly, with a net 35% expecting unit sales to increase, down from a net 47% a year ago. Despite concerns about an international economic slowdown, a net 15% of respondents have increased their revenue forecasts in the past few months. Plans for capital expenditures were unchanged, hinting at underlying strength in business confidence. Hiring expectations also remained fairly positive, with a net 27% planning to add new employees. The latest survey feedback suggests that while economic sentiment may have stumbled early in the year, for the most part, mid-sized companies remain cautiously optimistic about their own business prospects. www.mtb.com Equal Housing Lender. ©2016 M&T Bank. Member FDIC. 092004 (2/16) Improve Decelerate M&T COMMERCIAL BANKING DIVISION FEBRUARY 2016 “Which of the following best describes your employment plans over the next six months?” Middle Market Companies Hire Additional Workers Reduce Employment
Transcript of M&T COMMERCIAL BANKING DIVISION€¦ · Q1 2013 Q1 2014 Q1 2015 Q1 2016 Middle Market Highlights...
6% 3% 6%
22%
10% 5%
30%
54% 66% 52%
37%
47%
59%
24%
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11% 9%5% 6%
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Middle Market Highlights• 17% of Middle Market firms (sales
$10-$500 million) feel the economy has improved over the past six months, down significantly from the 54% reading a year ago. 29% say the U.S. economy has weakened, up from only 4% a year ago.
• 24% of respondents expect U.S. economic growth to accelerate over the next six months, while 30% expect the economy to slow.
• Unit sales expectations declined modestly, with a net 35% expecting sales to accelerate in the next six months, compared to 47% last year.
• Capital spending plans were largely unchanged, with a net 35% expecting to increase capital expenditures.
• Hiring expectations remain steady, with 31% of respondents planning to hire additional employees in the next six months, versus only 4% that plan to reduce employment levels.
• Low energy prices are expected to be a boon for most firms, with a net 36% expecting low prices to have a positive impact on their businesses.
Regional Differences• 54% of metro NYC firms expect
their regional economy to out-perform the U.S. during the second half of 2015—versus 46% for the Mid-Atlantic, 32% of Pennsylvania and 26% of Upstate NY respondents.
Commercial Real Estate• 19% say the U.S. economy has
improved over the past six months, down from 59% a year ago. 17% say the economy has decelerated, up from only 5% a year ago.
• 24% of CRE firms expect the national economy to improve in the next six months, down from 69% a year ago. Some respondents noted concern over the uncertain path of fiscal and monetary policy.
• Expectations for CRE industry performance declined, with a net 23% expecting conditions to improve, versus a 61% reading in Q1 2015.
• Cap rates and occupancy rates are both expected to rise moderately.
• 42% of respondents expect rental rates to rise, down from 54% in Q1 2015. 10% expect rental rates to fall.
“How do you expect the national economy to perform
over the next six months?”Middle Market Companies
Q1 2016 Economic Outlook Survey Results
Economic Pessimism on the Rise Despite Continued Strength in Business FundamentalsThe latest poll shows that mid-sized firms are concerned about financial volatility and signs of a weakening U.S. economy, but continue to hire, invest, and grow revenue at rates consistent with the expansion norm.
Only 1-in-4 middle market companies expect national economic conditions to improve over the next six months, versus 30% who expect conditions to deteriorate. Commercial real estate (CRE) firms were similarly pessimistic, with a net 3% forecasting that the economy will downshift.
Conversely, company sales growth expectations declined only modestly, with a net 35% expecting unit sales to increase, down from a net 47% a year ago. Despite concerns about an international economic slowdown, a net 15% of respondents have increased their revenue forecasts in the past few months.
Plans for capital expenditures were unchanged, hinting at underlying strength in business confidence. Hiring expectations also remained fairly positive, with a net 27% planning to add new employees.
The latest survey feedback suggests that while economic sentiment may have stumbled early in the year, for the most part, mid-sized companies remain cautiously optimistic about their own business prospects.
www.mtb.com Equal Housing Lender. ©2016 M&T Bank. Member FDIC. 092004 (2/16)
Improve
Decelerate
M&T COMMERCIAL BANKING DIVISIONFEBRUARY 2016
“Which of the following best describes your employment plans
over the next six months?”Middle Market Companies
Hire Additional Workers
ReduceEmployment
19%
38%32%
26%
36% 36% 35%
0%
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20%
30%
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50%
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2% 3% 3%
24% 30%
43%48%
Substantially Better Moderately Better
26% 32%
46% 54%
Upstate NY PA Mid-Atlantic NYC Metro
29% 16% 16% 10% % Saying
Worse Than U.S.
10% 11% 10%14%
10% 10%15%
53%58%
54%
46%49%
45%
35%
0%
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6% 3% 6%
22%
10% 5%
30%
54% 66% 52%
37%
47%
59%
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6% 3% 6% 16%10%
4%
29%39%
57% 46%
36%41%
54%
17%0%
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30%
40%
50%
60%
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Near-Term Outlook Shows Similar RetrenchmentThe percentage of respondents expecting the economy to slow moves above those expecting better growth for the
first time since the federal government shutdown of Q3 2012
Business Investment Plans Stay Consistent With Recent Readings
Despite softer near-term revenue growth, firms remain disciplined in their capex spending
“How would you rate the current state of the U.S. economy compared to six months ago?”
Middle Market Companies
“How do you expect the national economy to perform over the next six months?”
Middle Market Companies
Expectations Moderate But Remain PositiveSurvey respondents expect conditions in their own industry
to improve in 2016 by more than a 2-to-1 margin
Better
Worse
Improve
Deteriorate
The Mid-Atlantic and NYC regions expect to outperform the U.S. average, while Upstate NY and PA see slower growth
“Adjusting for normal seasonal ups and downs in your business cycle, what do you expect to happen to the real volume (number of units)
of goods and services that you will sell during the next six months?”
Net Percentage Expecting Higher Unit SalesSales Expectations Downshift But Remain Positive
Half (50%) of all respondents project moderate sales growth through the first half of 2016 vs. 15% that see weaker revenue performance
46%
52%
48%
38%
48% 47%
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50%
55%
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“Which of the following best describes your firm’s capital equipment spending plans over the next six months?”
Net Percentage Increasing Capex Spending
“How do you expect the economy in your metro area to perform relative to the U.S. over the first half of 2016?”
Middle Market Companies
“What are your expectations for your own industry over the next six months?”
Middle Market Companies
Improve
Deteriorate
M&T COMMERCIAL BANKING DIVISIONFEBRUARY 2016
Respondents See a Downshift in the EconomyDespite a solid job market, low interest rates, and positive consumer
spending, perceptions of an economic slowdown have increased
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11%5% 5% 4%
9% 5%15%
57%
74%60%
54% 54%66%
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4% 5% 3%
16%9% 3%
27%
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24%0%10%20%30%40%50%60%70%80%90%
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Inventory Correction is Fully UnderwayRespondents expect to pare inventory stockpiles during the first half of 2016
CRE Respondents See Economic SlowdownOnly 1-in-5 say the economy has improved,
well below prior survey readings
Near-Term Expectations Soften as WellCRE respondents are evenly divided about the outlook
for economic growth over the next six months
Industry Outlook Worsens But Remains PositiveWhile expectations have slipped from year ago readings, a net 23% of respondents still expect conditions to improve
Lease-Up Expectations Largely UnchangedA net 11% of respondents expect occupancy rates to
rise, while nearly half expect rates to remain flat
“How would you rate the current state of the U.S. economy compared to six months ago?”
Commercial Real Estate Companies
“How do you expect the national economy to perform over the next six months?”
Commercial Real Estate Companies
“What are your expectations for your own industry over the next six months?”Commercial Real Estate Companies
“Looking ahead six months, how do you expect your occupancy rates to change from their current levels?”
Commercial Real Estate Companies
Better
Worse Improve
Deteriorate
Improve
Deteriorate
Increase
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“Which of the following best describes your firm’s employment plans over the next six months?”
Middle Market Companies
11% 9%5% 6%
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“Looking ahead six months, how do you expect your inventory levels to change?”
Middle Market Companies
Hiring Pace Remains SteadyRespondent concerns about an economic slowdown have not had a noticeable effect on plans for payroll expansion
Hire Additional Workers
ReduceEmployment
Increase
Decrease
M&T COMMERCIAL BANKING DIVISIONFEBRUARY 2016
www.mtb.com Equal Housing Lender. ©2016 M&T Bank. Member FDIC. 092004 (2/16)
“What are your expectations for the volume of commercial real estate transactions nationally over the next six months?”
Commercial Real Estate Companies
7% 5% 4%10%
2% 2%
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48% 51%55%
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Increase morethan 3%
Increase 2% to3%
Increase lessthan 2%
Hold wage andsalary structure
flat in the next 12months
10%
51%
25%
14% 8%
52%
23% 17%
2016 2015
15%7% 5%
10% 7% 7% 10%19%
36% 38%43%
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Rental Rate Forecasts Moderate After 2015 SpikeExpectations have dipped from year ago readings but remain
in line with the historical survey norm
Transaction Volume Outlook Declines SignificantlyOnly a net 2% of respondents expect sales activity to increase in
the near-term versus 53% twelve months ago.
CRE Credit Easily Accessible For Most CRE FirmsMost CRE investors have sufficient access to financing, with both regional lenders and capital markets operating well
“How do you feel about the availability of CRE financing from the following sources over the next six months?”
Commercial Real Estate Companies
“In the past few months, how have your forecasts for total revenue in 2016 changed?”
All Survey Respondents
“In general, what are your plans for managing employee wage and salary increases over the next year?”
All Survey Respondents
Better
Worse
“What are your expectations for cap ratesover the next six months?”
Commercial Real Estate Companies
6%
20%
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9%
15% 13%
42%
24%
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26%
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27% 38%
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0% 4%
96%
Very Insufficient Sufficient Insufficient
Regional Lenders Capital Markets
Very Insufficient Sufficient Insufficient
4% 8%
88%
Q1 Q1 Q1 Q1 10 12 14 16
Q1 Q1 Q1 11 13 15
Q1 Q1 Q1 11 13 15
Q1 Q1 Q1 11 13 15
Q1 Q1 Q1 Q1 10 12 14 16
Q1 Q1 Q1 Q1 10 12 14 16
0%
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20%
25%
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35%
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Moderatelyincreased
No change Moderatelydecreased
Significantlydecreased
2%
34%
43%
20%
1%
“Adjusting for normal seasonal ups and downs, what do you expect to happen to rental rates during the next six months?”
Commercial Real Estate Companies
Increase
Decrease
Increase
Decrease
Cap Rate Expectations Rise to Post-Recession HighRising real estate prices and a moderating rental rate outlook
have put upward pressure on cap rates
Revenue Forecasts Remain PositiveA net 15% of respondents have increased revenue forecasts in the past few
months despite financial market turmoil and slow international growth
Wage Pressure Remains in Line With Recent Readings60% of respondents plan to increase wages and salaries by at
least 2%, on par with year-ago feedback
M&T COMMERCIAL BANKING DIVISIONFEBRUARY 2016
www.mtb.com Equal Housing Lender. ©2016 M&T Bank. Member FDIC. 092004 (2/16)
ABOUT M&T: Founded in 1856, M&T Bank Corporation (www.mtb.com) is one of the 20 largest U.S. commercial bank holding companies, with more than $120 billion of assets and more than 800 branch offices in New York, Pennsylvania, New Jersey, Maryland, Delaware, Virginia, West Virginia and Washington, D.C.
SURVEY METHODOLOGY: An Internet survey was conducted by M&T during January and February 2016 among senior managers and owners of mid-sized businesses located throughout the Bank’s geographic footprint. A total of 467 responses were received, consisting of 395 Middle Market enterprises (annual sales $10 million to $500 million) and 72 Commercial Real Estate investors/lessors. M&T has conducted the survey since mid-2009.
DISCLAIMER: This newsletter has been prepared by the Commercial Banking Division of M&T Bank and is not a product of any of M&T’s other affiliates, including any of its registered investment advisors. The views herein are provided for informational purposes only and may differ from those of other departments or divisions of M&T Bank and its affiliates. The information is not intended as specific advice or recommendations and should be viewed as merely representative of a broad range of possible outcomes.
For additional information about survey results, please contact:Gary Keith
VP - Regional EconomistCommercial Planning & Analysis
(716) [email protected]
Very Positive 1 2 3 4
Neutral 5 6 7 8 9
Very Negative 10
2% 2%
6% 8%
11% 36%
14% 11%
7% 4%
18%
36% Very Positive 1
2 3 4
Neutral 5 6 7 8 9
Very Negative 10
1% 3%
9% 14%
12% 42%
5% 5% 6%
3%
27%
19%
7%
11%
18%
13%
23%
28%
5%
10%
15%
21%
23%
24%
Slow International Growth
Skilled Worker Shortage
Unpredictable Fiscal Policy
Federal, State, and Local Tax Burden
Regulatory Burden
Lack of Innovation
Biggest Challenge
2nd Biggest Challenge
52%
46%
34%
33%
21%
12%
“On a scale of 1 to 10, what impact do you expect the strong U.S. dollar to have on your business in 2016?”
All Survey Respondents Mixed Impact From Strong Dollar
Manufacturers are more likely to cite the strong dollar as a business concern, while service providers tend to see it as a modest positive
Very Positive 1 2 3 4
Neutral 5 6 7 8 9
Very Negative 10
1% 3%
6% 7%
8% 21%
12% 17%
12% 11%
17%
53%
-5-
Global Economic Headwinds Expected to be ModestOne in four respondents expect sluggish global growth to
negatively impact their business in the coming year
“What do you think are the biggest challenges to U.S. economic growth over the next five years?
All Survey Respondents
“On a scale of 1 to 10, what impact do you expect slow international economic growth to have on your business in 2016?”
All Survey Respondents
Lower Input Prices Benefit Most Respondents By a 3-to-1 margin, respondents expect low energy and
commodity prices to be a positive for their business
“On a scale of 1 to 10, what impact do you expect low energy prices and the commodity glut to have on your business in 2016?”
All Survey Respondents Lower Input Prices Benefit Most RespondentsBy a 3-to-1 margin, respondents expect low energy and
commodity prices to be a positive for their business
Gov’t Policies Seen as Largest Obstacle to Long-Run GrowthMost see slow international growth and lack of innovation as minor concerns
M&T COMMERCIAL BANKING DIVISIONFEBRUARY 2016
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