Grant Thornton Sees Business Optimism Dropping

Optimism among U.S. business leaders dropped in the fourth quarter, according to a new survey by Grant Thornton, plummeting 16 percentage points to a net balance of 36 percent.

Hiring expectations in the United States declined for the first time in the past year, with a net balance of 38 percent of business leaders foreseeing an increase in hiring during the coming year, down from 42 percent the previous quarter.

In addition, a net 52 percent of business leaders indicated they expect profits to grow, a slight decline from 54 percent the previous quarter and a substantial increase from 28 percent a year ago.

U.S. business growth expectations improved, with a net 65 percent of businesses expecting to see revenues climb during the next 12 months, up from 50 percent in third quarter 2013 and up from 38 percent from the same period last year.

However, a net balance of 37 percent of U.S. businesses leaders cited economic uncertainty as the number one constraint to growing their operations in the next 12 months.

“It’s clear that the recent gridlock in Washington is significantly contributing to the lack of confidence in, and optimism about, our economy among the nation’s business leaders,” said Grant Thornton LLP CEO Stephen Chipman in a statement. “Our nation’s political leaders were able to reach a budget agreement, which will likely avert another costly government shutdown and extend the sequester for the next two years. However, they must now turn their attention to embracing a long-term debt ceiling solution combined with comprehensive tax and entitlement reforms that would provide a level of economic certainty that businesses are desperately seeking.”

The notion that the government shutdown affected optimism about the economy correlates with other recent research from Grant Thornton LLP, indicating that 60 percent of CFOs believe the state of the U.S. economy will remain the same or worsen during the next six months because of similar uncertainty.

The lack of optimism in the U.S. economy is consistent with what is occurring in other global markets. Global business optimism fell to a net balance of 27 percent, down five percentage points from third quarter 2013. Optimism among Chinese business leaders declined following a 27 percentage-point increase to net 31 percent in the previous quarter. In the fourth quarter of 2013, business optimism in the world’s second largest economy fell to a net balance of 22 percent.

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