Trendsetter Barometer® business outlook: Q2 2019 top findings

Global headwinds chill US privately-held company sentiment.

Doubts over the strength of the US economy to withstand global headwinds are rising among CEOs and CFOs of US privately-held companies, according to PwC’s Trendsetter Barometer second-quarter findings. Net US economic sentiment* declined to 61%, down from near-record high of 82% at this time a year ago. While still historically positive, the reading indicates that more executives are now looking beyond the effects of US business tax reform and a strong jobs market to assess other factors potentially impacting their business in the year ahead. Chief among these are concerns over the global economy, where outlooks for the next 12 months continue to weaken with net sentiment dropping to -33% in the second quarter from +18% a year ago. Whether directly or indirectly impacted, many panelists say they are focused on trade uncertainty between the US and China.

“Tariffs on exports from China are a major concern for us,” volunteered the owner of a manufacturer in the logistics industry. “We are downsizing our employee count due to the cost of steel as a result of the tariffs.”

“Business fundamentals are still largely positive for US private companies. What’s becoming more challenging is planning for the future, given uncertainties surrounding trade actions going forward, and the inroads being made by digital technologies that are becoming more evident by the day, whether at the checkout counter or in the growth in home deliveries.”

Ken Esch, PwC’s Trendsetter Barometer leader and a partner in Private Company Services

Outlooks for the next 12 months

Wages seen continuing to trend up: Panelists are now budgeting for a mean expected increase in hourly wages for their current workforce at 4.70%, above expectations for a mean increase of 4.54% in the prior quarter and 3.60% a year ago. Their views have served as a good leading indicator of the annual change in US employment costs.

Workforce expansion slowing: A net 43% of panelists plan to expand the workforce over the next 12 months vs. 50% at this time a year ago.

Softer revenue growth projected: Panelists are now projecting revenue growth at an average of 6.4% over the next 12 months, down from expectations for a 7.1% growth pace at this time a year ago.

Policy unknowns are a rising concern A majority of panelists (64%) continue to see the lack of qualified of workers as a barrier to their business growth over the next year, consistent with levels a year ago. Concerns over ‘legislative and regulatory pressures’ are rising, cited by 59% in the second quarter from 52% a year ago.

No pullback in capital spending expected: A third of panelists plan to commit to major investments in the business with 38% expecting an increase capex over the next year, little changed from the 32% planning future major spending projects in the first quarter and 35% at this time a year ago.

About the survey

Second quarter 2019 results reflect the views of 300 CEOs/CFOs interviewed between April 1, 2019 to June 28, 2019, representing a cross-sector profile of US privately-held firms with average annual enterprise revenue of $367.5 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.

Historical trends at a glance

Contact us

Shawn Panson

Private Company Services Leader, PwC US

Ken Esch

Private Company Services, Trendsetter Barometer Leader, PwC US

Margaret Young

Private Company Services, East Region Leader, PwC US

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