Executives at mid-market companies are becoming more cautious about the economic outlook in the coming year, according to a new survey by Deloitte.

The survey found that 29 percent of the 522 executives polled at U.S. midsize companies believe the U.S. economy won’t grow more than 2 percent over the next 12 months, the highest proportion since the spring of 2014.

“This is the fifth year we’ve done this survey, and this is the first time we’ve actually seen a bit of moderation in terms of these executives’ views about the U.S. economy,” said Deloitte vice chairman Roger Nanney, national managing partner of Deloitte Growth Enterprise Services. “To put it in context, this is still a pretty confident bunch, but we have had higher percentages of these executives who have been extremely confident that the U.S. economy was going to continue to grow at a robust rate, and that has now moderated to where the majority of this group tend to be just confident.”

More than half the executives (53 percent) cited rising health care costs as the No. 1 obstacle to U.S. growth, while more than one-third (34 percent) refer to health care costs as the No. 2 issue for company growth, behind the uncertain economic outlook. Nearly one-third of the survey respondents (32 percent, up from 26 percent one year ago) favor rolling back health care reform as a way to foster growth.

In addition to health care costs, 31 percent of the mid-market executives polled by Deloitte expressed concern about increased regulatory compliance requirements, such as in the energy sector.

“Clearly when you look at the energy sector, especially oil and gas, and companies who have significant business dealings internationally, particularly China, there’s obviously some concern there,” said Nanney. “The energy and health care sectors cited the regulatory burden as being something that would be an obstacle for them from a growth perspective.”

The market research firm OnResearch conducted the survey from Oct. 22 to Nov. 4, 2015, before the Federal Reserve’s short-term rate-hike announcement in December, and the delay of some of the taxes in the Affordable Care Act in the tax extenders legislation passed by Congress last month. The executives polled cited rising interest rates as one of their top concerns, after the uncertain economy, health care costs, and regulation. More than one-third (33 percent) believe the rising rates will be an obstacle to U.S. growth. Roughly 40 percent of executives consider keeping rates low as the second most important step the government can take to support business growth this year.

“The majority of the executives tended to indicate there was an expectation that they would continue to see rising rates, so that could present a bit of a headwind,” said Nanney.

On the positive side, the majority of the executives polled are still planning for their business to grow in the coming year at a rate of 10 percent or better. Another positive trend is in terms of hiring and training. Fifty-six percent of the mid-market executives polled reported their companies’ workforces grew over the past 12 months. While the results are in line with a U.S. labor market that is expanding steadily, nearly two-thirds agree that it is more difficult to find skilled talent to meet their business needs. More than half of respondents (51 percent) say training will dominate their talent investments in the year ahead.

“They are making big investments in training because we find that about two-thirds of these executives say it continues to be difficult to find employees with the skill sets that they need for the jobs that they’re looking to fill,” said Nanney.

Diversity also will be a key talent investment, as 63 percent of the executives polled said their company has, or is developing, programs to foster diversity and inclusion.

“Ninety-two percent of these companies indicated that female and minority members of their executive leadership teams were less than 50 percent, whereas we’re beginning to see that total company headcount is gravitating more toward more than 50 percent female and minority employees,” said Nanney. “There’s a trend that would suggest these companies should be thinking about their efforts in diversity. It also opens up a talent pipeline when you can get broader access to more of a diverse talent force, and also get the perspectives that are the makeup of what their customers look like today.”

The survey found that approximately two-thirds of the respondents said they either had or are planning to put in place diversity programs and initiatives. “It’s an emerging topic that I think deserves continued focus,” said Nanney. “We’re going to continue to pay attention to it.”

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