Optimism and Hiring Plans Improve for 3rd Straight Quarter
New York, July 23, 2013 – For the third consecutive quarter, the number of privately owned companies optimistic about the US economy's 12-month prospects rose, according to PwC US’s Private Company Trendsetter Barometer. In the second quarter of 2013, 59 percent of private companies voiced optimism — up nine points from the prior quarter and 17 points from the fourth quarter of 2012, reaching one of the highest levels post-recession. Two-thirds (67 percent) of private-company executives described the economy as growing, projecting 2.2 percent growth in calendar year 2013.
For US private companies selling in international markets, optimism about the world economy remained at a moderate 39 percent, though up two points from the first quarter. Meanwhile, international companies’ pessimism climbed seven points to 20 percent; 41 percent of them were uncertain.
While optimism about the US and world economies remained divergent, revenue forecasts matched for domestic and international companies — both sets of companies raised their 12-month revenue targets to 7.8 percent, up from six percent in the first quarter. Overall, 80 percent of private companies forecast positive revenue growth for the next 12 months, and one-third (33 percent) project double-digit growth.
“The steady climb of private companies’ optimism is a positive break from the fluctuations in confidence we're used to seeing,” says Ken Esch, a partner with PwC’s Private Company Services practice. “As momentum builds around optimism in the US economy, we're finding that this translates into more companies looking to reinvest in their growth plans.”
The following graphic depicts the trajectory of private-company optimism over time.
International Companies Maintain Aggressive Growth Plans, Though Challenges Persist
International sales improved in the second quarter, with 47 percent of international companies reporting higher sales — up 20 points from the first quarter — though margins were compressed, especially for companies selling in China, India and Brazil. One-in-four companies (26 percent) selling in these markets grappled with higher costs, which offset some of their sales increases. The overall anticipated contribution of international sales to total revenue among private companies over the next year fell one point from the first quarter to 17 percent.
Despite the margin pressure, international companies continue to lead their domestic-only counterparts in investing in growth. More international companies are planning major capital investments (42 percent vs. 23 percent for domestic-only companies), increased operational spending (78 percent vs. 60 percent) and new hiring (64 percent vs. 51 percent).
“International companies continue to advance an aggressive growth agenda despite concerns about the global economy, including slower growth in the emerging markets,” says Esch. “For these companies, maintaining a presence in key growth markets abroad is a priority, and so they are adapting to trends such as rising labor and shipping costs in China, rather than shying away from opportunities in global markets.”
More Companies Plan Net New Hiring
In a positive sign for the job market, the percentage of private companies planning net new hiring over the next 12 months increased by five points to 57 percent in the second quarter. Overall, the planned increase for the average composite workforce is 3.2 percent, on par with the first quarter’s 3.4 percent and well above a year ago (2.4 percent).
“Incremental but steady hiring among private companies underscores their focus on growth,” says Esch. “As companies seek to add to their ranks, however, they must continue to find creative ways of retaining the talent they've already invested in and trained for skilled positions.”
Additional Survey Findings
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About PwC's Private Company Trendsetter Barometer
Each quarter, PwC's Private Company Trendsetter Barometer tracks the business issues and best practices of America’s leading privately held businesses. This quarter's report incorporates the views of 202 C-suite officers (CEOs/CFOs): 105 from companies in the product sector and 97 in the service sector, averaging $306 million in enterprise revenue/sales, and including large, $500M-plus private companies.
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Edelman for PwC’s Private Company Services