While fewer chief executives of America's fastest growing companies are optimistic about the U.S. economy's prospects over the next 12 months, they continue to predict a healthy increase in their own company's revenue growth over the next year, according to a survey by PricewaterhouseCoopers.
The number of CEOs who remained positive about the U.S. economy's prospects for the next twelve months fell to 70 percent, off from 76 percent in the second quarter and down from a high of 84 percent in the fourth quarter of 2003, according to the latest Trendsetter Barometer, which surveyed the CEOs of 355 privately held product and service companies ranging from approximately $5 million to $150 million in revenue/sales. Uncertainty rose to 28 percent, while pessimism was virtually absent at 2 percent.
Concern about weak market demand is up: 63 percent cited weak market demand as a potential roadblock to growth over the next 12 months, a jump of 10 points from the prior quarter.
"Weak demand is by far the greatest and fastest growing concern among 'Trendsetter' CEOs," said Jay Mattie, PricewaterhouseCoopers' U.S. Private Company Services Assurance Services leader. "Certainly, abnormally high energy prices are a contributor, draining cash and creating a hesitation to make purchase decisions."
Comparatively fewer CEOs appear worried about other prospective barriers. Lack of qualified workers was cited by 33 percent; profitability by 32 percent; legislative and regulatory pressures by 32 percent; pressure for increased wages by 27 percent; lack of capital for investment by 25 percent; their own ability to manage/reorganize by 24 percent; and increased taxation by 21 percent.
Despite their concerns about the domestic economy and demand, "Trendsetter" CEOs held their revenue growth targets steady for the next 12 months, at 20.7 percent, similar to the 21.0 percent estimated in the prior quarter. Service companies have loftier targets: 22.6 percent growth, compared to 18.2 percent for product companies. Technology companies expect higher revenue growth than non-techs -- 22.3 percent and 18.9 percent, respectively, PwC reported.
The CEOs surveyed are also holding steady in their plans for new investments of capital: 44 percent are planning major new investments over the next 12 months, at an average spending level of 11.7 percent of revenues. Those figures are in line with prior-quarter figures of 45 percent planning new investments at an average 11.1 percent spending level.
Most expect increased budgeting in four key areas: information technology (cited by 46 percent); new product development (39 percent); sales promotion (39 percent); and advertising (30 percent). In addition, the number planning increased R&D spending rose to 23 percent, up from 18 percent.
Plans for new hiring over the next 12 months remained high, but dipped slightly from the prior-quarter estimate of 78 percent who planned net workforce gains, to 76 percent. CEOs now project a net workforce addition of 9.5 percent over the next 12 months, nearly two points lower than in the prior quarter, but well ahead of their 8.1 percent projection of a year ago. Those companies planning to hire expected revenue growth of 24.3 percent over the next 12 months, versus 9.7 percent for those not planning to increase their workforce, according to PwC.
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