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MICHIGAN — With manufacturing leading a turnaround in the state’s fortunes, the country is starting to take notice of the health of the Michigan economy.

News that Bloomberg Businessweek named the state’s economy as the second healthiest in the nation and that the state’s unemployment was down 0.5 percent to 10.6 percent in October buoyed business leaders’ sentiments. However, while two surveys of businesses show a more nuanced picture, business executives remain confident about the state’s future, but less so about that of the nation’s economy.

Small business owners in the state expect the economy to continue to improve over the next six months, with 86 percent of small business owners saying their business outlook for the next six months is good or somewhat good, according to a survey by the Small Business Association of Michigan. The effects of the tax reforms adopted by the Michigan Legislature, the rebound in the automotive industry and companies finding efficiencies have the state poised for growth going forward, said Michael Rogers, VP of communications at SBAM.

“Many small business owners I talk to are saying — they’re almost embarrassed — that they’re doing really well. Part of it is a function of the fact that we tend to run into successful businesses, but 24 months ago I would ask the question, and they would look crestfallen and talk about having to downsize,” Rogers said.

“We’re talking to the survivors. People who have made it this far have done a lot to improve their efficiency, turbocharge their marketing and strengthen their business,” he said. “The things they had to do to survive the recession are starting to pay off now. … They can survive in a much weaker economy, and now that it is improving, it is starting to profit.”

Among the other findings over the past six months in small businesses:

• 35 percent said sales had increased;
• 22 percent said profits had increased;
• 11 percent increased their number of employees;
• 15 percent increased employee wages;
• 18 percent of respondents said their major investments in facilities and equipment had increased.

Looking forward to the next six months, 9 percent of small business owners said they expect sales to increase, 30 percent expect profits to increase and another 15 percent plan to hire more employees.

When looking more broadly to the nation’s economy, executives’ outlooks sour. A survey from Business Leaders for Michigan found that business leaders are increasingly pessimistic about the national economy and fear the state will be dragged down with it.

The forecasts among the organization’s members are bleak: 10 percent of the respondents predict improvement over the next six months nationally, and 28 percent predict improvement in the state.

Doug Rothwell, president and CEO of the business roundtable and advocacy organization, said gridlock in Washington, D.C. is contributing to a negative outlook.

“It is all tied up in presidential politics. Both sides are playing to their base. Republicans are fighting any tax increases. Democrats are fighting any cuts to entitlement spending,” Rothwell said. “You end up with stagnation, (and) you cannot make any movement. I think that after the election, that changes. You are no longer playing for the presidency. Instead, you are looking at what can you say you got done as an elected official. The opportunity for compromise is much greater at that point.”

If the logjam can break free in the nation’s capital over the deficit and debt reduction fight, Rothwell sees the outlook improving.

“The good news is that there is a lot of pent-up demand. If there could be some resolution of those issues, the economy could rebound nationally,” he said. “It is a concern for Michigan. We are not an island. A stagnant national economy will affect Michigan. You see hiring and investment starting to peak in the state.”

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