Oct. 7, 2019

Sioux Falls CEOs are noticeably less positive about their businesses and the overall economy than they were a year ago.

That’s according to the quarterly SiouxFalls.Business CEO survey, done in conjunction with the Augustana Research Institute.

The CEOs were surveyed in September and asked to look ahead to the fourth quarter.

Three months ago, 27 percent said overall conditions in their business were excellent.

That dropped to 21 percent in September and eroded further compared with the same time last year, when 48 percent said conditions were excellent.

Their expectations for their businesses also softened quarter to quarter but are similar to what was anticipated one year ago.

“Business conditions continue to weaken and now stand at substantially lower levels than a year ago, third quarter of 2018. Changes from the second quarter 2019 survey are small, but tend to converge on ‘good’ as some respondents downgrade from ‘excellent,’ ” said Robert Wright, the Nef Family Chair of Political Economy at Augustana University.

“Businesses losing market share remain pessimistic about the future, but some have adapted to competitive pressures — lower prices for their goods or prices rising less quickly — by cutting costs.”

When asked about their hiring outlook for the coming quarter, CEOs expressed more uncertainty than they did a year ago, although about the same number continue to project above-average hiring.

On the ground, that uncertainty also is showing up.

“I’ve gotten more requests than usual to meet with professionals to talk about career options and networking,” said Linda Halliburton, associate dean for workforce education at the USD Community College for Sioux Falls.

“Some of these people have recently been laid off, and others are seeing their companies’ sales start to fall and are anticipating that a job change might be impending.”

CEOs showed a small drop in plans for capital expenditures year-over-year, with 15 percent projecting below-average spending in the next three months – up from 9 percent for the same time last year.

“It appears that some companies expect to or already have substituted relatively expensive and regulated employees with capital,” Wright said. “The trend is most obvious at checkout in retail stores, but automation efforts may also be underway behind the scenes in warehouses, call centers and such.”

When asked their perception of the overall business climate in Sioux Falls, CEOs felt similar to last quarter but not as good as a year ago. Forty-two percent said the city’s business climate was excellent in September, down from 61 percent a year ago.

Their opinion overall of the U.S. business climate also showed a year-over-year drop.

“Confidence in local conditions continues to outpace confidence in the national economy due in part to the inability to understand, let alone predict, President Trump’s economic policies and in part to South Dakota’s reputation as a turtle economy that moves forward slowly but steadily,” Wright said.