Private companies are just as confident in the U.S. economy as they were prior to the recession, according to PwC U.S.’s Private Company Trendsetter Barometer survey released on Tuesday.
The survey of 256 CEOs found that 63% of executives at private companies say they're optimistic about the US economy over the next year, the highest level of confidence that chief executives have shown since the second quarter of 2007, and up 24 points from the third quarter of 2010. At the same time, optimism in the global economy increased, with 56% of private companies saying they are confident in global economic growth, compared with 43% in the previous quarter.
Meanwhile, executives are confident about prospects for their own company’s growth rate and the majority of private companies plan to increase operational spending and make strategic hires. The biggest challenge is rising commodity costs, which cut into company profits. There was also an increase in the forecasted average growth rate of domestic-only private companies as firms became more bullish on domestic prospects. The forecasted average growth rate is up from 7.7% to 9.8%, bringing them in-line with international companies.
“The positive momentum we have seen over the last several months among leading private companies continues to build,” says Ken Esch, a partner with PwC’s Private Company Services practice, in a statement. “Throughout the recession they've managed costs and paid down debt, which has allowed them to strengthen balance sheets and preserve bottom-line growth. Now private companies are starting to see increasing demand for their products and services, leading to topline growth.”
The fourth quarter saw key market and legislative developments, including a rebound of M&A activity, a resurgent IPO market, and temporary legislative certainty provided by Congress in December, said Esch.
Despite similar revenue-growth forecasts among domestic-only and international private companies, those operating internationally plan to spend more over the next 12 months.
“Cash-fortified and newly optimistic private companies are looking to put their capital to work, and so they're going where the growth is,” said Esch. “As a result, we're seeing them steadily build and expand their presence in booming markets like China, India, and Brazil. And while it's true that growth in emerging markets has slowed, those markets continue to accelerate at a much faster clip than mature economies. I think that, increasingly, this is where we'll be seeing private companies train their focus.”
Private-companies are more worried about oil and energy prices, although lack of demand was the most cited by chief executives as a barrier to business growth over the next 12 months. Meanwhile, concern about legislative and regulatory pressure declined three percentage points to 51%. Only 35% of private companies expect increased taxation to be a threat to growth, the lowest level since the third quarter of 2009.