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US Private Companies Raise Revenue Forecasts

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US Private Companies Raise Revenue Forecasts

US private companies raised their 12-month revenue forecasts by 15 percent in the third quarter, despite economic and political challenges at home and abroad.

Despite ongoing US fiscal-policy issues, CEOs of US private companies raised their 12-month revenue forecasts to 9% in the third quarter, up 15% from the 7.8% they projected in the second quarter, according to a survey PwC US.

Two-thirds of chief executives said they believed the nation's economy was growing, while only 4% viewed it as declining.The last time that private companies' revenue growth rates were this high was in the first quarter of 2012, when they projected a 9.5% growth rate. Among private companies overall, those selling exclusively in the United State reported a sharply higher revenue growth rate of 10.4% compared with their international peers, which forecast a more moderate 7.3% increase. Private companies' projected revenue growth continues to well-outpace current and forecasted US GDP growth rates, which remain in the low single digits.

Optimism about the US economy's 12-month prospects held relatively strong, with more than half of the CEOs surveyed (55%) reporting optimism (just four points below the prior quarter). Pessimism was at a low 9%. Two-thirds of chief executives said they believed the nation's economy was growing, while only 4% viewed it as declining. With respect to the world economy, uncertainty remained the predominant sentiment, voiced by 54% of private companies, a 13-point increase from the second quarter. Thirty-five percent said they were optimistic, down from 39% the prior quarter.

"Lack of skilled labor is a significant headwind for private companies, compounded by the rapidly retiring workforce.""Private companies' strong revenue projections indicate steady improvement in the US economy," says Ken Esch, a partner in PwC's Private Company Services practice. "While growth may be slower than we would like to see, this latest forecast is a positive sign. Certainly US political and economic issues continue to be of concern. That said, private-company leaders have come to expect short-term political fixes and therefore aren't making strategic decisions on that basis. Most of their businesses haven't felt the long-term effects of sequestration, and so the recent economic debate in Washington hasn't kept them from pursuing their growth objectives."

This graphic depicts the trajectory of private company optimism over time.

 

Hiring Plans Level, Lack of Qualified Workers a Challenge

While private companies' plans for net new hiring over the next 12 months were well above what they'd been a year ago, when 1.6% workforce growth was projected, the third-quarter projection of 2.2% is markedly below the prior quarter's 3.2%. A key reason for the dip was that larger private companies scaled back their hiring plans. However, the overall percentage of private companies planning new hiring remained steady at 57%, and just 4% of companies expected to reduce headcount.

Average increases in hourly wages, however, rose to 2.89% — up 12% from a year ago and the highest planned increase in five years — reflecting companies' ongoing difficulty finding qualified workers. More than one-quarter of private companies cited this difficulty as a potential barrier to growth, with another 19% citing pressure for increased wages.

"Lack of skilled labor is a significant headwind for private companies, compounded by the rapidly retiring workforce," says Esch. "Among our domestic-only manufacturing clients in particular, we see challenges in finding sufficiently skilled blue-collar workers such as welders and machine operators. But we're also seeing companies searching for people to fill white-collar roles, such as controllers and chief financial officers. We encourage companies to make attracting, retaining, and training key workers a strategic priority so they'll be well-positioned for the next growth opportunity."

See the full report here

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