Trendsetter Barometer® business outlook
Top findings from Q2 2017
Private company sentiment about the US economy is improving. A net 69% of PwC’s Trendsetter panelists - CEOs and CFOs in privately-held US businesses - now feel optimistic about the US economy over the next 12 months, up from 64% in the first quarter and 28% this time a year ago.* This is feeding into expectations of brighter prospects for their own businesses.
Private companies shifted into expansion mode over the second quarter: A net 52% now plan to add employees over the next 12 months. The last time panelists were above the net 50% workforce expansion mark was in the fourth quarter of 2015. In a sign of a tightening market for skills, panelists also are forecasting future wage hikes. Current employees now are expected to earn an average 2.78% increase in hourly wages over the next 12 months. This is ahead of the 2.5% annual rise in private sector hourly wages in June in Department of Labor data. The Trendsetter outlook for wages has been a good predictor of annual growth in US employment costs overall.
How much of this upswing in sentiment hinges on the ultimate success of Trump Administration reforms promising lower business tax rates and deregulation to boost US growth? Given the setbacks and divisiveness over healthcare reform in Congress, the majority of panelists are now either unsure (31%) or not confident (32%) that the Administration can deliver when it comes other complicated issues, such as tax reform. The reform agenda has broad support from panelists, yet as a CFO at a mortgage banker told us, concerns are building: “The major programs they put forth, such as repeal of the ACA and corporate taxes, seem to be going nowhere and a host of other issues will stall them even more.”
As a result, private-company leaders are not banking on a boost to revenue growth. There is no significant difference in Trendsetter’s 12-month forecasted company revenue growth between the third who are ‘confident’ that the Trump administration will be able to deliver on reforms (6.7% annual growth) and the third who are ‘not confident’ (6.9%).
Yet these proposals – particularly in tax, deregulation and increasing infrastructure spending – are important to panelists. Regardless of how they weigh prospects for enactment, most believe that these three proposals are moving ahead in directions that will benefit their business. For example, several panelists cited hopes for stimulus to upgrade American infrastructure when asked to call out ‘critical success factors’ that might trigger increased growth for their business and industry over the next 12 months. “Roads and bridges need to be repaired and this will provide a much needed boost to employment,” commented a CFO at an auto dealership.
Confidence in the progress of these reforms over the next few months will be a pivotal factor in private-company hiring and investment planning. Panelists with greater confidence levels in the reform agenda are more likely planning to add employees and invest for growth in the next 12 months.
Confidence in the progress of corporate tax rate cuts and deregulation will be a pivotal factor in privately-held company new hiring and investment planning in the months ahead.
An animated look at the predictive trends we're seeing in the latest Trendsetter Barometer survey, including key findings from US private companies in the second quarter of 2017.
PwC’s Trendsetter Barometer is a quarterly survey of CEOs and CFOs of privately-held companies, is now in its 21st year. Panelists’ views have served as a good leading economic indicator on where US GDP growth is likely to be in a year’s time and whether employment numbers will rise or fall, our analysis of the data show. Second quarter 2017 results reflect the views of 301 CEOs/CFOs interviewed between April 3 and June 30, 2017, representing a cross-sector profile of US privately-held firms with average annual enterprise revenue of $343 million.
*PwC calculates net economic sentiment as the balance of panelists who are “optimistic” minus those who are “pessimistic” about how they feel about the US economy over the next 12 months. We exclude “uncertain” responses.