Other Key Findings:
Global and U.S. confidence remains muted
The middle market overall continues to show a lack of confidence in the
global and U.S. economies – highly concerned about health care costs,
the ability to maintain margins, the cost of doing business and
uncertainty regarding government actions. More than 70% of the middle
market said they were not confident or somewhat not confident about
global economic prospects. Concerns about the U.S. economy worsened
slightly in the quarter; 52% of respondents said they were not confident
or somewhat not confident about the domestic economic outlook, compared
with 50% in the
previous quarter.
Future investment outlook remains cautious
Middle market companies remain hesitant to invest additional cash,
extending their habit of postponing investment opportunities. The number
of companies who said they would hold cash dropped in the third quarter
from 49% to 44%, providing a glimmer of hope that the middle market may
start investing in capital expenditures, expansion or other areas that
could fuel growth. However, that number lags first-quarter results when
41% said they would hold excess cash.
Next 12-month revenue expected to soften
Middle market companies expect gross revenue to gain 3.7% in the next 12
months, a decline from second quarter expectations of 4.8% and 5.2% for
1Q expected growth. All revenue segments expect some decline and there
was a sharp drop off in the number of firms expecting to grow more than
10%. Only 17% of all respondents in the survey said they expect
double-digit revenue growth compared with 23% in the prior quarter, and
28% in Q1.
*Revisions
to the 1Q mean revenue and employment scores have been adjusted using
the Winsorization Method to adjust outlier values in the distributions.
The extreme values have been replaced by trimmed minimum and maximum
(values representing the middle 95th percentile of each overall
distribution within the survey instrument). In addition, the means have
also been rebased so that they are reflective of the Middle Market as a
whole and not solely the proportion of the market experience growth or
contraction.
Challenges persist
A large majority of leaders at middle market companies cited uncertainty
about healthcare costs as their major challenge, a persisting concern
as healthcare and other regulations remain in flux. The same concerns
were highlighted in Q1 and Q2 surveys. In addition, middle market
company leaders expressed a rising concern with their ability to
maintain margins and the cost of doing business, indicating that they
are having trouble and foresee difficulties in rising prices and passing
on increased costs to customers.
