The outlook for the next 12 months is toward more positive growth projections despite continued concerns about demand.

Key findings include:

Outlook is cautiously optimistic

Looking ahead at the next 12 months, 49 percent of senior executives surveyed are optimistic about the US economy’s prospects, and only 12 percent are pessimistic. A notable minority, 39 percent, remain cautious or uncertain. A similar pattern is found among panelists marketing abroad: 44 percent are optimistic about prospects for the world economy over the next 12 months. Only 10 percent are pessimistic, but 46 percent remain cautious or uncertain. Overall, these panelists have thrown off the prevailing pessimism held a year ago.

Growth projections solid

Looking at the next 12 months, 63 percent of these senior executives forecast positive revenue growth, with 21 percent expecting double-digit growth and 42 percent expecting single-digit growth. Only 11 percent anticipate negative growth in the year ahead. Overall, panelists project a 3.4 percent average growth rate for their own companies over the next 12 months, up from last quarter’s 2.7 percent projection. This is a far better forecast than 2009 revenue results, where 50 percent of panelists reported negative growth for the year.

International sales improve

In fourth quarter 2009, 40 percent of panelists who market abroad reported increased sales, and only 19 percent said sales decreased, for a net increase of 21 percent. Looking at the next 12 months, the contribution of international sales to total revenue among those selling abroad is forecast at 30 percent, up 1 point from the prior quarter.

Gross margins flat

Looking ahead, 37 percent view decreasing margins as a barrier to their business growth in 2010. In the fourth quarter, gross margins were higher for 29 percent and lower for 23 percent, for a net plus 6 percent higher. Costs and prices were low, with prices remaining flat: Costs were up for 15 percent and down for 27 percent, for a net 12 percent with lower costs; prices were up for 18 percent and down for 18 percent.

Workforce at a plateau

Over the next 12 months, 32 percent plan new net hiring, and 12 percent plan layoffs. The majority, 56 percent, do not plan to change their workforce levels. Overall, the forecast is a net minus 0.6 percent for the workforce.

Investments down, operational spending up

Fewer respondents are planning major new investments of capital over the next 12 months, down from 36 percent last quarter to 29 percent. Mean investment is at a lower 4.8 percent of total sales, down from the prior quarter and a year ago. In contrast, a pickup in operational spending is planned, as 70 percent expect increases. Areas showing the biggest increase in operational spending include new product or service introductions, information technology, and marketing and sales promotions. Plans for mergers and acquisitions declined to 27 percent, but new strategic alliances and expansion to new markets abroad increased.

Headwinds persist

Panelists said the chief barrier to own-company growth over the next 12 months will continue to be lack of demand, cited by 62 percent, down 7 points from the prior quarter. Two other major concerns are legislative/regulatory pressures (53 percent) and taxation policies (47 percent). Both are higher among businesses planning major new capital spending.

Barriers to business, next 12 months:

Lack of demand	62%
Legislative/regulatory pressures	53%
Taxation policies	47%
Decreasing profitability	37%
Competition from foreign markets	28%
Oil/energy prices	27%
Monetary exchange rate	25%
Capital constraints	25%
Higher interest rates	18%
Pressure for increased wages	12%
Lack of qualified workers	8%

About this survey:

The PricewaterhouseCoopers Management Barometer Survey is compiled with assistance from BSI Global Research, Inc. One hundred and thirty executives participated in this survey by telephone between November 2, 2009 and January 29, 2010.

Demographic profile:

--Number of participants	130
--Average number of employees	9,532
--Average revenues	$3.81B
--Enterprise revenues	$10.54B
--Market capitalization	$10.85B

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