Daily News: October 30, 2014

NCMM: Middle Market Execs Report Revenue Growth

Middle-market executives report accelerating revenue growth over the past four consecutive quarters, which peaked at 7.5%, the highest rate since the launch of the Middle Market Indicator (MMI). According to the National Center for the Middle Market’s (NCMM) survey of 1,000 C-suite executives, 68% report company revenue increasing in the past year, with mean total revenue growing two percentage points faster than the S&P500.

Concurrently, middle market employment growth has been consistently above 3% for all of 2014, adding workers at levels even above strong hiring in 2013. Although the nation’s nearly 200,000 mid-sized firms represent only three percent of American businesses, they are projected to create 61 percent of all new jobs in the coming year. Notably, the healthcare industry has seen the largest jump in employment among middle-market firms.

“America’s mid-sized companies have completed a remarkable run in which revenue growth has accelerated for four quarters in a row,” said Thomas A. Stewart, executive director, NCMM, a collaboration between GE Capital and The Ohio State University Fisher College of Business. “For the past year, employment growth in the middle market has averaged about three and a half percent — a full percentage point higher than the average in the eight previous quarters. The middle market has found a higher gear.”

Forty-three percent of executives report that employment increased in the past year and mean total employment growth was 3.5%, which is well ahead of both its smaller and larger counterparts at 2.2% and 2.6%, respectively, according to ADP job data. Looking ahead, 64% of executives report gross revenue will grow over the next 12 months at an expected mean total revenue growth rate of 5.5%. Likewise, 47% of executives report employment will rise during the same timeframe, growing at 3.6%.

The investment outlook slightly declined this quarter, with 61% of middle market companies planning to invest dollars back into their businesses. Although executives plan to hold on to more cash, 44% of companies say they are extremely or very likely to introduce a new product or service within the next 12 months. Similarly, 41% of companies report they are extremely or very likely to expand into new domestic markets over the same timeframe.

Challenging Labor Dynamics

Middle market companies continue to be subject to dynamics in the labor force, with about 50,000 saying they expect the retirement of Baby Boomers to negatively affect their financial performance. Although 68% said it will influence their company in some way, nearly 40% of middle market firms do not have plans in place to address the impact of Baby Boomer retirements. When it comes to hiring, 63% of firms say it has become more difficult to attract people to senior positions, but say it is less challenging to attract talent for entry-level positions.

Mixed Economic Confidence

Middle market companies have an increasingly negative view of the global economy. About a quarter of all middle market firms — 26% — report being unconfident in the global economy, up from just 17% in Q2 and 15% in Q1.

Middle market executives’ views of the national economy continue to vary based on their company’s home state. Nationally, 67% of middle market executives are confident in the U.S. economy. In Texas, 73% of middle market executives are confident in the U.S. economy. Additionally, 94% of Texas executives express confidence in their local economy. In Illinois, 46 percent of middle market executives are confident in the U.S. economy, likely due to the state’s unemployment rate being 0.8 percentage points higher than the national average.