NFIB

Michigan's Business Climate Remains at Rock Bottom
Release Date: 12/ 01/ 2005

CONTACT: Charles Owens or Keith Carey, (517) 485-3409
or Michael Diegel, (202) 554-9000

Energy Costs, Price Increases, Tax Uncertainty Add to Pressure

LANSING, Mich. -- Michigan's overall business ratings remain at the bottom of the pile, sinking further as small-business owners face increasing pricing pressures and uncertainty surrounding recent tax relief vetoed by the governor, according to the most recent Michigan Small-Business Conditions^SM poll. The report's data, which was released today by the National Federation of Independent Business/Michigan, provides an overview of small-business conditions within Michigan and compares them with neighboring and other large population states.

A net 4 percent (positive percent minus negative percent) of small-business owners described the state's overall business climate as "supportive," compared to last quarter's net 8 percent. To put it in perspective, out of 26 states surveyed, Michigan was tied for 24th place with California and only New York and Washington state scored lower at 25th and 26th, respectively, in business climate.

In addition, Michigan is dead last in the rankings of current business conditions (net negative 2), those who see business conditions improving (net negative 9 percent), those who said sales are good (net 20 percent) and those who reported profits were good (net 4 percent).

At the same time, a net 67 percent of the state's small employers said they are paying higher prices on their purchases, up sharply from a net 55 percent in the prior quarter. A net 19 percent reported raising selling prices, up from a net 10 percent last quarter.

"Michigan's small-business owners continue to absorb one body blow after another, as energy price increases are beginning to be felt throughout the supply chain," said Charlie Owens, NFIB/Michigan's state director. "The recent tax cut fiasco in Lansing culminating in the governor's veto of promised tax relief also sends a discouraging message to business."

When asked what the impact of the recent run-up in energy prices has had on their business, a whopping 75 percent of respondents reported some negative impact, while 17 percent responded "no impact."

"Michigan's small-business owners seem to be paying for those price increases with increased borrowing," Owens said, noting that the number reporting "no credit needs" dropped from a net 55 percent last quarter to a net 47 percent this quarter. Fortunately, he added, getting credit does not appear to be a problem, as a net 39 percent reported "all credit needs satisfied," up from a net 31 percent last quarter.

There also were similar purchasing price increases reported by small-business owners in Indiana and Ohio. A net 63 percent of those surveyed in Indiana reported increased purchasing prices, up from a net 55 percent last quarter. In Ohio, the number rose from a net 55 percent to a net 62 percent.

Michigan Small-Business ConditionsSM
This chart shows the results from Michigan and its comparative standing among selected states in the region.
		Mich.	Ind.	Ohio	Wis.
Business Climate	Survey Date
Overall state business environment
Net % supportive of small business	11/2005	4	20	11	23
	Prior qtr.	8	28	11	17
Business conditions in market area
Net % "good"	11/2005	-2	23	15	35
	Prior qtr.	2	29	20	36
Net % "improving"	11/2005	-9	-4	-5	4
	Prior qtr.	-5	9	2	6
Outlook for business
Net % "good" in next three months	11/2005	35	50	51	51
	Prior qtr.	40	56	49	60
Reason for optimism
% Sales prospects	11/2005	49	45	46	45
	Prior qtr.	42	45	50	49
% Lower costs	11/2005	4	4	4	7
	Prior qtr.	3	4	4	2
% Price increases	11/2005	2	3	1	5
	Prior qtr.	2	5	2	3
% Greater productivity	11/2005	13	17	13	14
	Prior qtr.	11	12	12	11
% Government policy	11/2005	2	4	4	6
	Prior qtr.	4	5	3	2
% Seasonal/Weather	11/2005	16	8	15	10
	Prior qtr.	10	8	8	10
Reason for pessimism
% Sales prospects	11/2005	IC*	IC	IC	IC
	Prior qtr.	IC	IC	IC	IC
% Cost increases	11/2005	IC	IC	IC	IC
	Prior qtr.	IC	IC	IC	IC
% Pressure on selling prices	11/2005	IC	IC	IC	IC
	Prior qtr.	IC	IC	IC	IC
% Lower productivity	11/2005	IC	IC	IC	IC
	Prior qtr.	IC	IC	IC	IC
% Government policies	11/2005	IC	IC	IC	IC
	Prior qtr.	IC	IC	IC	IC
		Mich.	Ind.	Ohio	Wis.
Sales and earnings (last quarter)
Sales
Net % sales "good"	11/2005	20	33	37	41
	Prior qtr.	22	37	34	42
Profits
Net % profits "good"	11/2005	4	16	13	22
	Prior qtr.	0	14	13	22
Employment
Current job openings (one or more)
% "Yes"	11/2005	15	16	17	21
	Prior qtr.	17	19	17	24
Per employee payroll cost
Net % "risen"	11/2005	10	16	15	19
	Prior qtr.	8	12	12	20
Employee cost pressures (greater)
% Wages	11/2005	49	54	54	55
	Prior qtr.	50	57	50	49
% Benefits	11/2005	32	26	32	33
	Prior qtr.	31	26	33	35
		Mich.	Ind.	Ohio	Wis.
Productivity
Upgraded technology/processes (last three months)
% "Yes"	11/2005	43	43	42	45
	Prior qtr.	38	41	40	41
Made capital expenditure(s)  (last three months)
% "Yes"	11/2005	36	41	46	44
	Prior qtr.	35	42	40	45
Made expenditure to train employee(s) (last three months)
% "Yes"	11/2005	39	39	41	44
	Prior qtr.	36	39	39	44
Capacity utilization - can increase sales 10% without new inputs
% "Yes"	11/2005	52	57	55	51
	Prior qtr.	53	49	50	54
Credit availability (last three months)
% All credit needs satisfied	11/2005	39	34	39	45
	Prior qtr.	31	35	37	43
% All credit needs not satisfied	11/2005	10	7	6	9
	Prior qtr.	7	5	6	6
% No credit needs	11/2005	47	53	52	42
	Prior qtr.	55	53	51	48
		Mich.	Ind.	Ohio	Wis.
Prices
Purchasing prices (last three months)
Net % increased	11/2005	67	63	62	63
	Prior qtr.	55	55	55	63
Selling prices (last three months)
Net % increased	11/2005	19	15	18	21
	Prior qtr.	10	16	16	22
Miscellaneous
Involvement in start of another business
% "Yes"	11/2005	12	9	13	11
	Prior qtr.	9	8	8	9
Single most important business problem
% Weak sales	11/2005	20	10	11	10
	Prior qtr.	17	11	13	11
% Taxes	11/2005	8	15	13	9
	Prior qtr.	11	15	18	12
% Employee quality/costs	11/2005	8	7	7	8
	Prior qtr.	7	9	8	9
% Insurance	11/2005	13	16	16	23
	Prior qtr.	17	16	13	20
% Big-business competition	11/2005	14	11	11	17
	Prior qtr.	11	13	14	13
% Inflation/Rising prices	11/2005	18	16	19	14
	Prior qtr.	14	13	12	12
% Credit availability/Interest rates	11/2005	3	3	3	1
	Prior qtr.	3	2	3	1
% Regulations/Red tape	11/2005	5	6	8	7
	Prior qtr.	5	6	8	8

*Insufficient cases

Michigan Quarterly Spotlight
Does your business have an emergency plan for disasters that you have communicated to your employees?
Yes	37%
No	60%
Don't know/Refused	3%
Total	100%
What has been the impact on your business of the recent run-up in energy prices?
Seriously negative	19%
Somewhat negative	28%
Slightly negative	28%
No impact	17%
Positive	3%
Don't know/Refused	5%
Total	100%

 

The Poll
NFIB’s Michigan Small-Business Conditions^SM is a telephone survey of a random sample of Michigan small employers regarding business conditions within the state. “Small employer” is defined here as employing between one and 250 people (not including the owner(s)) in a for-profit business. Each edition of the survey has a minimum of 350 respondents. The sampling error is ± 5 percentage points. Data are collected quarterly in the months of February, May, August and November, beginning in February 2005. The MRCGroup of Las Vegas conducts the survey for the NFIB Research Foundation.

The Sponsor
The NFIB Research Foundation is a 501 (c)(3) organization that provides policy-makers, media, educators, small-business owners and other interested parties empirically based information on small business and small-business owners. The Foundation is affiliated with the National Federation of Independent Business, the nation’s largest small- and independent-business advocacy organization, and is located in Washington, D.C.