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Jan. 11, 2021
If Sioux Falls businesses took a hit during the pandemic, it hasn’t appeared to last long.
Those who responded to the most recent quarterly SiouxFalls.Business CEO survey, done in conjunction with the Augustana Research Institute, projected increases in business activity, hiring and capital investment along with reported sales increases.
The survey was conducted during the second half of December and completed by three dozen CEOs.
“Based on the surveys we received, businesses are reporting a V-shaped recovery from the COVID-19 pandemic that began at the end of the first quarter of 2020,” said Reynold Nesiba, professor of economics at Augustana University.
“Business conditions, prices, sales, employment and investment are up. Looking forward, survey respondents are optimistic about the trends in business activity, investment, hiring and the South Dakota business climate.”
Respondents felt similar about the Sioux Falls business climate to start 2021 as they did at the start of 2020 – before the pandemic had become a reality.
Ninety-two percent said it’s good or excellent – down just slightly from 96 percent one year ago – and up from the 82 percent who said it was good or excellent three months ago. When the survey was taken shortly after the start of the pandemic, that number was 33 percent.
The increase in positivity could be because the CEOs have enjoyed increasing success in their businesses.
Nearly one in three reported a significant increase in sales during the past three months, compared to 18 percent in the prior quarter.
Fourteen percent reported a slight or significant decrease, an improvement from 24 percent three months earlier.
Hiring also increased to end the year, with 55 percent saying they slightly or significant increased hiring. That’s also greater than the previous quarter.
“This is up dramatically from 18 percent in the first quarter and 21 percent in the second quarter,” Nesiba said.
CEOs also were positive in their expectations for the coming quarter.
More than half expect above-average business activity, up from one-third three months ago.
There’s also an increasing appetite for capital spending, with nearly one in four anticipating above-average capital investment and 8 percent projecting below-average capital spending.
“Fully 89 percent expect average or above-average investment this coming quarter. This is up from 26 percent at the beginning of the year,” Nesiba said.
Hiring for new positions also appears to be rebounding, with 28 percent of CEOs predicting their business will hire an above-average number of people in the coming quarter, while 19 percent say it will be below average.
“Eight-one percent expect average or above-average hiring. In the first quarter this sum was only 34 percent,” Nesiba said.
“For the nation as a whole, inflation is likely to be muted because of the ongoing softness in the labor market. On Friday, Jan. 8, the Labor Department reported that employers cut 140,000 jobs in December, and the national unemployment rate remained high at 6.7 percent. This is likely due to the nationwide increase in COVID-19 cases, as well as the tempering of federal stimulus payments.”
In South Dakota, unemployment in November was 3.3 percent, the same rate it was at in November 2019 before the pandemic.
“This might contribute some upward pressure on wages. However, one would expect this to be modest given the low-inflation environment in the U.S. economy overall,” Nesiba said. “Over the last 12 months, inflation has been 1.2 percent. Given that the 10-year Treasury Bond yield is at 1.13 percent this week, market participants are clearly factoring little inflation into calculations for real returns on bonds in the foreseeable future.”
While survey respondents were enthusiastic about the local economy and their own business prospects, they were less optimistic about the national business climate. Only one in four rated it good, while 75 percent called it fair or poor. That’s on par with the responses three months ago.
“There is a recognition that business conditions are better in South Dakota than they were at the beginning of last year, and they continue to be better than the U.S. economy,” Nesiba said.
“Economic activity here and across the country for the next three quarters will likely be determined by two main variables: how quickly vaccines are rolled out and how much stimulus the Biden administration can get passed through an almost equally divided U.S. Senate.”
If Sioux Falls businesses took a hit during the pandemic, it hasn’t appeared to last long. Take a look at the results of our latest Sioux Falls CEO survey.