Business Execs Feeling Less Optimistic about Economy

Only 19 percent of top executives at U.S. businesses are feeling optimistic about the health of the economy over the next 12 months, according to a quarterly survey by Grant Thornton, a huge decrease from the 50 percent who said they felt optimistic in the second quarter.

The findings reflect the growing financial uncertainty facing American businesses in the current economic recovery. While the decline in U.S. optimism was significant from the second to the third quarter of the year, it is still greater than in the rest of the world. In China, confidence decreased from 33 percent to 11 percent during the same time period. Even Germany experienced a drop in optimism from 40 percent in the second quarter to 28 percent in the third quarter.

The Grant Thornton International Business Report also found that 58 percent of the business leaders polled expect a revenue increase over the next 12 months. Specifically, 71 percent of respondents from the West expect revenue to increase, along with 63 percent of Northeast business owners, 58 percent of those in the Midwest, 53 percent of Mid-Atlantic/Southeast respondents, and 49 percent of those in the Central part of the U.S.

“Businesses in the U.S. are experiencing uncertainty about how the economy will perform in the next 12 months,” said Grant Thornton CEO Stephen Chipman in a statement. “Much of this is likely due to the overall uncertainty in the country right now—from the outcome of the presidential election to the fiscal cliff. Even so, U.S. business executives are showing some signs of optimism about their revenues and profitability.”

In addition, 34 percent of businesses expect to increase employment and 57 percent expect no change. While businesses are planning to hire, employers are cautious in the raises that they expect to give to their employees.

The findings show that 67 percent of businesses plan to give employees a raise that aligns with the cost of inflation. This is most common among those in the Northeast (72 percent), followed by the Midwest (71 percent), West (69 percent), Mid-Atlantic/Southeast, and Central (63 percent).

Nearly half of U.S. respondents (49 percent) believe there will be no change in accessibility to financing for their business, something that is further evident in the different regions: 64 percent of those in Midwest, 57 percent in Mid-Atlantic/Southeast, 55 percent in the Northeast, 53 percent in the West, and 44 percent in the Central states. Similarly, 90 percent of those surveyed said they believe their lender is supportive toward their business. In fact, businesses surveyed believe the biggest constraint to growing their business is regulation and red tape, with 32 percent identifying it as such.

For the survey, Grant Thornton hired Experian to survey both listed and privately held businesses. Data was based on interviews with 3,050 businesses from all industry sectors across the globe conducted in August/September 2012. The target respondents are CEOs, managing directors, chairmen or other senior executives.

“Though optimism in the U.S. declined, there are some bright spots for U.S. businesses,” said Chipman. “While many businesses are holding steady, the next few months will be a good indicator of where we stand on the path to economic recovery.”

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