Business leaders representing the nation’s nearly 200,000 mid-sized
firms are bullish about the U.S. economy, fueled by consistently strong
revenue growth. In fact, middle market companies grew revenue over the
past 12 months at 6.6 percent, nearly twice as fast as the S&P 500 at
3.4 percent. This strength boosted executive confidence in the U.S.
economy to a record high of 68 percent, according to the latest Middle
Market Indicator (MMI), a quarterly survey of 1,000 C-suite
executives conducted by the National
Center for the Middle Market (NCMM). These results suggest continued
growth for the nation’s economy despite the first-quarter drop in U.S.
gross domestic product (GDP).
The U.S. middle market, made up of businesses with revenue between $10
million and $1 billion, contributes one-third of non-government U.S. GDP
and accounts for 45.6 million jobs, or one-third of private U.S.
employment. Employment growth for mid-market firms over the past 12
months was 3.2 percent, which added an estimated 750,000 jobs to U.S.
payrolls so far in 2014. If mid-market companies deliver on projected
job growth of 3.3 percent, the sector will create 59 percent of all new
jobs in 2014.
“For the second quarter in a row, U.S. middle market companies turned in
exceptionally strong growth in revenue along with solid gains in
employment,” said Thomas A. Stewart, Executive Director, NCMM,
a collaboration between GE Capital and The Ohio State University Fisher
College of Business. “Mid-market executives seem to be determined to
translate revenue increases into solid productivity improvements by
holding the line on investments in capital and labor both.”
According the latest MMI,
70 percent of mid-market executives expect to see revenue growth in the
next year, an 11 point jump from the prior quarter. Furthermore, about a
quarter of these executives expect to see revenue growth above 10
percent. This confidence boosted revenue growth projections to 5.8
percent, lifting the outlook by $130B compared to the prior survey.
Mid-sized firms continue to invest in future growth, with 63 percent
planning to put money back into their businesses. Business executives
are focusing their investments on capital expenditures for plant and
equipment as well as information technology.
Challenges persist
Health care costs remain the number one concern for middle market
executives, with 54 percent rating this issue as “highly challenging”
after dipping to 46 percent last quarter. The retail trade and services
industries in particular have increasing concerns about health care.
About 67 percent of mid-market retail executives report health care is
“highly challenging,” a jump from 42 percent in the prior quarter. About
49% of services leaders from mid-sized firms characterized health care
as “highly challenging,” compared with 36 percent in the prior quarter.
Middle-market executives also expressed concerns about government
actions. Half of business leaders surveyed report that the regulatory
environment is more restrictive now than it was a year ago. Uncertainty
about corporate tax policies is a growing issue for the middle market
this quarter, with 20 percent citing it as “highly challenging,” up from
13 percent last quarter and suggesting concern over lawmakers’ ability
to compromise on tax reform.
Industry bright spots
The manufacturing and health care sectors saw increased performance over
the last year. Seventy-two percent of mid-sized manufacturers reported
higher revenue growth, with an average year-over-year growth rate of 7.3
percent, and 68 percent of health care executives said their revenues
increased, a jump of 16 points.
Looking ahead, four mid-market industry sectors are particularly
optimistic about their prospects over the next 12 months, with three out
of four saying they will growth revenue well above the national average:
construction (8.1 percent), services (8 percent), manufacturing (7.2
percent), and financial services (6.7 percent). Mid-sized construction
firms plan to hire new employees at a rate of 5.1 percent over the next
12 months.
About the Middle Market Indicator
The MMI
surveys 1,000 executives (CEOs, CFOs, and other C-Suite executives) from
the middle market's nearly 200,000 companies, focusing on their business
capabilities and performance, growth drivers, and economic outlook. This
quarter’s MMI
was fielded June 9 to 18, 2014. It is weighted to accurately reflect the
size and geographic distribution of this sector, which includes
companies with revenues between $10 million and $1 billion.
The quarterly MMI
tracks responses on the following topics: Gross revenues performance;
Overall company performance; Employment performance; Expected 12-month
gross revenue and employment growth; Confidence in the global, U.S. and
local economy; Key business challenges; Top areas for investment
dollars; Perceptions on topical issues and challenges relevant to the
U.S. middle market.
The survey is conducted by the independent research firm RTi on behalf
of the NCMM.
About the National Center for the Middle Market
The National
Center for the Middle Market (NCMM) was founded in 2011 in
partnership with GE Capital and is located at The Ohio State University
Fisher College of Business. The Center is the nation’s leading research
institution dedicated to helping middle market companies be more
competitive through impactful research, thoughtful advocacy, and
educational programs. To learn more about the Center or the MMI,
visit www.middlemarketcenter.org.
Copyright Business Wire 2014