As much of the U.S. reopens nearly a year and a half since the outbreak of the COVID-19 pandemic in the country, midsize business leaders’ optimism about their industries and companies have hit record highs, according to JPMorgan Chase’s 2021 Business Leaders Outlook Pulse survey.
Nearly nine in 10 business leaders (88%) are optimistic about their company’s performance for the next six months, the highest percentage recorded in 11 years of the survey and up from 56% one year ago at the height of the pandemic in the U.S. Survey participants are also feeling confident about the industry they’re in, as 82% are optimistic about their industry’s performance, a significant jump from 45% a year ago.
This rising confidence extends to the broader economy as well. Three-quarters of respondents are optimistic about the local (76%) and national economy (75%), each representing an increase of at least 40 percentage points from a year ago. Optimism about the global economy, which has traditionally been more muted, is at its highest level (53%) since 2018, up from just 17% last summer.
The rosy outlook is driving ambitious growth plans for companies. The majority (80%) anticipate a rise in revenue/sales and close to half (46%) expect to increase investments in capital expenditures, up from 18% one year ago. In line with these growth plans, nearly four in 10 businesses (38%) expect an increase in credit needs for the remainder of 2021.
“After enduring the challenges of the last year and a half, businesses are feeling overwhelmingly positive about what’s ahead,” Jim Glassman, head economist for JPMorgan Chase Commercial Banking, said. “The focus now is on navigating growing pains to harness the momentum of the economic recovery, which is comparatively a good problem to have.”
Pandemic-Related Changes Are Here to Stay
The disruptions brought on by the pandemic forced businesses to adapt quickly and evolve their business models, with some of these changes expected to be permanent. The top strategic actions business leaders have taken include:
- Introducing New Offerings: The majority (61%) have diversified and strengthened their offerings by delivering new product and service lines, with many planning to maintain these products and services post-pandemic.
- Digitizing Operations: 39% of businesses expanded their e-commerce capabilities as more customers shopped online, and 38% digitized their accounts payables and receivables processes to boost efficiency.
- Expanding Geographically: In addition to reaching customers via new digital channels, 38% of businesses expanded into new geographic markets.
“Businesses are proving yet again that when put to the test, they adapt, innovate and rise to the occasion and, in many cases, become stronger and gain market share,” John Simmons, head of middle-market banking and specialized industries for JPMorgan Chase Commercial Banking, said. “We’re working with our clients to help chart a path forward and lean into new opportunities, from digitizing manual back-office processes to evaluating strategic transactions like a merger or sale.”
Supply Chain Issues Are a Top Challenge
Businesses’ supply chains were hit particularly hard by the events of the past year and a half, and ongoing supply chain issues top the list of challenges for the year ahead. Companies report having to utilize new suppliers, digitize back-office functions and manage their supply chain remotely, with many businesses planning to maintain these changes in the future.
Other challenges cited by business leaders included uncertain economic conditions and sustaining revenue and sales growth. Businesses are also contending with the reality of a tight labor market, as the large majority (81%) hope to hire more workers in the next six months, especially as large numbers of experienced Baby Boomers retire.
Cybersecurity is also a growing concern, as one-third of companies reported being directly impacted by a cyberattack or fraud since March 2020. Among the businesses that have experienced attacks, 79% said employee education and training has been the most helpful mitigation tactic and 56% said proactive countermeasures, including deploying new technologies, have been beneficial.
The New Workplace
With pandemic-related restrictions recently lifted or modified in many parts of the U.S., businesses are re-evaluating their working models. Thirty-eight percent expect all employees to return to on-site work, while one in four respondents (26%) are implementing a new flexible working model. Of the businesses that are taking a flexible approach, preserving company culture is a top concern, followed by maintaining productivity levels.
According to JPMorgan Chase, companies should factor the following considerations into their business plans to position themselves for success in the year ahead:
- Consider Costs: Recent rising prices, many of them resulting from supply chain bottlenecks, have stoked new fears of inflation. While the Federal Reserve and many economists see most price increases as transitory, business leaders should keep a close eye on prices and adjust their production capacity accordingly.
- Ready Yourself for Ransomware: Recent ransomware attacks have shown that companies of all sizes and industries are vulnerable. To thwart a potential ransomware attack, companies should regularly test their backups, install the latest software updates, continually evaluate resiliency plans and take other steps outlined here.
- Continue Company Culture: As business leaders consider new working models, preserving company culture remains top of mind. When designing a working model, companies should use their learnings from the past year to address key intangibles of corporate culture.
JPMorgan Chase’s Business Leaders Outlook Pulse survey was conducted online from June 7 to June 18 with middle-market companies with annual revenues between $20 million and $500 million. In total, 1,375 business leaders in various industries across the U.S. participated in the survey. For year-over-year trends, current data was compared with data collected in Q2/20. The results of this online survey are within statistical parameters for validity and the error rate is plus or minus 2.6% at a 95% confidence level.