[July 29, 2015] |
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Middle-Market Economy: 'Steady as She Goes'
For the second quarter in a row, middle market executives say that
middle market corporate growth continues to moderate, suggesting that
the business cycle remains steady following a period of robust growth in
2014.
Some 66 percent of middle-market executives reported improved past-year
company performance in the second quarter of 2015, up two percentage
points from the first quarter, according to the National Center for the
Middle Market's Q2
2015 Middle Market Indicator (MMI) issued today.
What's more, those companies in the center of the middle market
(revenues of $50 million to $100 million) saw especially solid
performance, increasing by 10 percentage points from the first three
months of 2015.
Middle-market companies, defined as those with revenue between $10
million and $1 billion, account for roughly one-third of the total
employment status of the U.S. and generate $10 trillion in annual
revenue. While relatively unreported on, the U.S. middle market is the
fifth largest economy in the world following Japan and leading Germany
in size.
"So much of the middle market remains privately held, and as such, it
has maintained a low profile despite its outsized importance on the
overall economy," said Thomas A. Stewart, Executive Director, NCMM, a
partnership between GE Capital and The Ohio State University Fisher
College of Business. "Revenue for middle market companies grew 6.6
percent, year over year. Revenue for S&P 500 actually declined 1.8
percent. And while revenue expectations have tapered off a bit for the
next 12 months-perhaps in anticipation of increases in wages, interest
rates, or energy costs-the middle market continues to set the pace for
the economy."
Small but Steady Gains
Since the second quarter of 2014, the middle market has seen a three
percentage point increase in companies reporting improved performane
(66 percent in Q2 2015 vs. 63 percent in Q2 2014) while the percentage
of companies that reported deteriorated performances fell from nine
percent to six percent, representing a shift towards sustainable, solid
growth. Three out of five middle market businesses continue to
anticipate future business growth.
Workforces Have Rightsized
Employment growth in the middle market continues to slow, with the mean
total growth decreasing from 4.3 percent in Q1 to 3.9 percent this
quarter. Furthermore, companies lowered expectations for hiring over the
next 12 months, with 38 percent expecting to hire in the next year and
only 31 percent expecting to hire in the next three months, both down
from the previous quarter. Meanwhile, companies at the high end of the
middle market (revenues of $100 million to $1 billion) are showing
significantly reduced workforce growth expectations with 35 percent
anticipating a new hire, down from 42 percent in Q1.
Top Concerns
Two-thirds of middle market companies expressed concerns that
unexpectedly rapid wage increases would negatively impact their
businesses. The construction (77 percent) and healthcare (76 percent)
industries are the most worried about wages, while companies in the
financial services space (53 percent) were fairly neutral on the issue.
In addition, 76 percent of middle market companies feel that state and
federal regulations negatively affect their business, noting the
complexity of regulations and costs of compliance as the main issues.
Other Findings Included the Following:
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Middle market companies prioritize government spending on physical
infrastructure over digital infrastructure (cybersecurity) and
education
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Confidence in the U.S. economy dropped this quarter, although middle
market companies are more confident now in the global economy than
they have been in the last year
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The retail industry saw the largest drop in short-term sales
expectations and has the lowest anticipated workforce increases over
the coming year (1.2 percent)
For additional survey data and infographics including in-depth looks at
regional variations, hiring/talent acquisition efforts and other
business concerns among middle market companies, visit http://www.middlemarketcenter.org.
About the Middle Market Indicator (MMI)
The MMI surveys 1,000 executives (CEOs, CFOs and other members of the
C-Suite) from the middle market each quarter to examine topics related
to business capabilities and performance, growth drivers and economic
outlook among other topics. This quarter's MMI was fielded June 2 to
June 12, 2015. It is weighted to accurately reflect the size and
geographic distribution of this sector, which includes companies ranging
from $10 million to $1 billion in annual revenue. The survey is
conducted by RTI International on behalf of the National Center for the
Middle Market.
About the National Center for the Middle Market (NCMM)
The National Center for the Middle Market was founded in 2011 in
partnership with GE Capital and The Ohio State University Fisher School
of Business. The Center is the nation's leading research institution
dedicated to helping middle market companies to be more competitive
through research, advocacy and educational initiatives. To learn more
about the Center visit www.middlemarketcenter.org.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150729005949/en/
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