The coronavirus pandemic has dismantled the global economy since March, leaving a lasting impression on the confidence of local business leaders.
In February, before the pandemic gripped Springfield’s economy, SBJ Publishing Inc. issued the first round of the 2020 Economic Growth Survey. The results indicated the SBJ Business Confidence Index was nearly 143, down slightly from the year prior, according to the survey conducted by H2R Market Research. But in a second survey taken in April, that confidence index fell to 81.7. The baseline is 100.
And no one was immune. The shock to confidence was felt by respondents from every sector as market expectations flattened, according to the data.
Nearly 41% of private-sector respondents say they expect their market to improve over the next year, while nearly half of respondents anticipated their market would stay the same or worsen.
With a 43% decline in business confidence over the course of two months, it begs the question: How can business confidence be restored?
Mahua Barari Mitra, a professor of economics at Missouri State University, says COVID-19 has had the greatest impact to economic activity since the Great Depression. But this recession is different than previous downturns, she says, because it stems from a government-mandated shutdown.
“It’s a recession by design, not by accident,” Mitra says. “The lack of confidence is bound to be there because we don’t know how long this is going to last. It’s new territory.”
According to the survey data, the most important information businesses want to see is insight into what both consumers and employees will want before returning to the marketplace or the office. Mitra says business and consumer confidence relies on assurance of safety.
“The economic health and the public health are intertwined. Even if the economies start reopening, are we going back to the movies or restaurants like we used to? It will be like this until there’s a full vaccine,” she says. “It’s not enough that we’re reopening; we have to make sure people show up at the doors.”
Mitra pins a turnaround on local or state governments. They’re in a position to mandate the use of face masks, which she expects would ease consumer concerns. She also says infusing the local economy with additional financial aid from the state or national government would help businesses stay afloat until consumers fully return to the marketplace.
Additionally, SBJ survey respondents earlier this year identified several governmental items as barriers to business: taxes, the building permit process and development charges. Improving city safety and infrastructure also remained top concerns compared with last year’s survey.
Matt Morrow, president of the Springfield Area Chamber of Commerce, views the economic slowdown as sending many businesses back to startup mode. But overall, he says businesses are on the path to recovery.
“We also have to remember that the businesses returning to that startup mode are the ones who didn’t fail the first time. They’re better at this, make good decisions and have that advantage,” he says. “Innovation is in the DNA of entrepreneurs.”
Morrow was a panelist during Springfield Business Journal’s Economic Growth Survey forum June 24, along with KC Mathews, chief investment officer at UMB Bank, and Steve Mullins, a Drury University economics professor.
As for a timeline of a recession, Mathews anticipates the recession lasting less than six months, while Mullins says it’s unlikely a sense of normalcy will return until a vaccine is available.
In the survey of local executives, the main share of respondents in the private sector expect the market to stay the same or increase by 25% this year from last year, with roughly one-fifth of respondents anticipating a slight negative impact. However, the nonprofit response varied with expectations ranging from a 50% decline to a market increase of 25%.
Ozarks Food Harvest Inc. President and CEO Bart Brown isn’t surprised by the wide range of outlooks in his industry. He says nonprofits didn’t have to pivot as dramatically as for-profit businesses did over the last few months, which lends to confidence in the future. The industry’s challenge is donor fatigue on the horizon, he says.
“The nonprofit sector serves a population that is always in crisis,” Brown says. “The business community’s recession is the nonprofit’s every day. What we serve is adversity, and we do it very well in this community. … But we’re nowhere near the end of this, and the need for nonprofits is just going to continue and the need for resources will continue.”
To close their confidence gap, Brown says nonprofits should focus on what can be controlled, such as fundraising efforts.
Another tip is to embrace the fear, says Don Harkey, CEO of business consulting firm People Centric Consulting Group. His firm sees two types of leaders in the pandemic: those consumed by the fear and those energized by it.
“Because it’s an outside influence, it’s not necessarily something that a business does wrong that impacts how they perform – which shakes confidence,” he says.
“The secret to closing the gap is to embrace it. I do think we’ll make progress on it, but we won’t close it by the end of the year.”
He says Springfield’s public leaders can help by continuing to develop long-term plans, such as discussions of building a convention center.
“We need to cast that vision so that we can get there,” he says. “We can recover faster because we’ve decided to.”
The Forward SGF comprehensive plan was born from the input of residents, and one message that came through loud and clear was their desire for connection.