The end of 2022 marks another banner year for the middle market.

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The end of 2022 marks another banner year for the middle market. Top line revenue and employment growth rates across a variety of industries, geographies and revenue bands have remained consistently high. Three consecutive surveys now report historically strong growth, notable as society and the economy continue to move further past the devastating effects of a global pandemic.  

The center has long recognized middle market companies as being particularly adept at managing growth while being resilient in the face of headwinds and challenges.  Inflation continues to be the most universal challenge across businesses of all sizes, and the middle market is no exception.  In addition, growing fears of a potential recession in 2023 have dampened some investment planning despite rebounding levels of confidence in the overall strength of the economy.  A bit of good news appears to be the easing of supply chain disruptions, with less companies saying this continues to be an issue impacting their operations and revenue. 

GROWTH – Real or Misleading?

The MMI measures both top-line revenue growth rates, as well as employment, for the prior twelve months.   Consistently strong revenue (12.2% vs. 12.3% in 2021) and employment (11.1% vs. 10.8% in 2021) begs the question: are these results representative of real organic growth, or are they being inflated by both inflation driving an increase in prices/rates and payrolls still recovering from cuts made during 2020 and 2021?

The current inflation rate is running at approximately 6.5%, and one in three middle market companies state they have been positively impacted by inflation in the past six months, but mostly in areas such as inventory, wages/salaries, and indirect expenses.  Regardless of a positive or negative impact, a majority of companies report passing on their increased costs to customers in the form of higher prices for their products and services.  Therefore, while some top-line growth is attributed to inflationary impacts, what is more important is that more than 70% of middle market companies say they are doing better now than a year ago.

Confidence rebounds, but with caution

Economic confidence, measured across global, national, and local scales, has made a rebound from the mid-year 2022 survey.  Global confidence, at 73%, is up nearly 10 points from the summer.  Local confidence – reflecting where most mid-size companies operate locally and regionally – has also increased from 76% to 84%, on par with a year ago.  One set of data points do not constitute a trend, but the shift is promising given the challenges throughout 2022.

Despite the growing levels of confidence, investment plans are being approached with a cautiousness typical of middle market leaders.  This trend has been ongoing since the pandemic, as only 55% of businesses would look to invest an additional dollar of revenue (vs. a historical average of nearly 70% from 2012-2019).  Interestingly, six in 10 “savers” would plan to hold cash for a future investment…perhaps when interest rates plateau or begin to decline, which does not appear to be a likely possibility in the near future.  Expansionary activity will be an interesting area to monitor in 2023.


While inflation continues to dominate the national economic discussion, fears of a potential recession are starting to keep some middle market leadership teams awake at night.  Surprisingly, approximately 40% of companies say they would benefit from a recession, while just slightly more say it would cause negative consequences.  Not surprisingly, the result would be tightening the belt, so to speak, by cutting expenses through budget reductions as well as increasing efficiency and saving cash.  

Another ongoing challenge continues to be workforce – everything from attracting, hiring, developing and retaining workers with the rights skills to help support growth, new products and services and ongoing digitization of businesses.  While not a new challenge, the ongoing tight labor market means the competition for talent remains fierce.  It will be interesting to see if Fed policy around controlling inflation truly leads to more labor availability…albeit at higher wages and salaries.