Chief executives are feeling optimistic about the U.S. economy over the next 12 months for the first time since the second quarter of 2007, with CEOs of private companies with international operations being slightly more optimistic than those that are only domestic.
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Meanwhile, the number of CEOs expressing pessimism fell four points from the previous quarter to 11%, a 30-point drop from the same quarter in 2009. Fifty three percent of CEOS at private companies with international operations were optimistic, compared with 49% of CEOs at private companies with domestic-only operations.
CEOs revenue growth projections for the next 12 months increased 1.5 points from the previous quarter's 8.5%. Seventy-seven percent of leading private businesses plan for positive revenue growth over the next year, with 38% expecting double-digit growth, same as the previous quarter and up 13 points from the first quarter of 2009 and 39% expecting single-digit growth, up six points from the previous quarter and 13 points from the first quarter of 2009, PwC said.
Only 5% of the CEOs surveyed forecast negative growth, down six points from the previous quarter, while 17% expect zero growth.
“As we've moved beyond the last few quarters, private business owners are more confident that the U.S. and global economies have hit rock bottom and are beginning to recover,” said Ken Esch, partner, PwC, Private Company Services practice. “Consequently, we're now seeing more companies projecting growth. It's important to note, however, that these projections are still almost half of what private company CEOs were projecting in mid-year 2007.”
Meanwhile, approximately 26% of private companies surveyed reported higher gross margins in the first quarter of 2010, while 22% reported lower margins, which led to cost and price increases during the quarter, the report said.
For the first time since the second quarter of 2008, 53% of executives surveyed plan to add staff to their workforce over the next 12 months, up from 47% in the prior quarter and up from 31% in the first quarter of 2009. At the same time, just 4% of respondents are planning to reduce staff over the next twelve months, down four points from the previous quarter and six points from the same period in 2009.
“It's encouraging to see that private companies are backing up their expectations for growth by investing in their workforce,” Esch said. “The smaller companies in our sample are planning to hire relatively more employees than the larger companies. This could be the beginning of an upward trend in the labor markets.”
Concern about lack of demand remains a potential barrier to growth, with 74% of respondents, citing demand as a worry. Other top concerns include legislative/regulatory pressures (48%); increased taxation (45%); profitability/decreasing margins (40%); and lack of capital for investment (25%).
Part of the challenge in the first quarter of 2010 has been a lack of bank loans, with only 4% of those surveyed reporting they had loans, off one point from the prior quarter and six points from one year ago. More small businesses, with revenue under $100 million, completed bank loans (5%) in the first quarter than large businesses (2%).
“While there may be evidence that the credit markets are becoming more active, and quality borrowers are gaining access to capital at increasingly more favorable terms, the data so far doesn't reflect new loans,” Esch said.
