Quarterly findings from the Management Barometer show own-company revenue targets for the next 12 months have been lowered in the face of persistent pessimism about the US and world economies and a softening in international sales.
Key findings include:
Pessimism continues
Looking ahead, 66 percent of senior executives of US-based multinationals interviewed are pessimistic about prospects for the US economy over the next 12 months, only 9 percent are optimistic, and 25 percent are uncertain. Of panelists who market abroad, 63 percent are pessimistic about prospects for the world economy over the next 12 months, only 6 percent are optimistic, and 31 percent are uncertain. Survey responses about views on the US economy remain parallel with views on the global economy, and each largely mirrors the survey’s third-quarter results.
International sales dip
Looking at the next 12 months, the contribution of international sales to total revenue is expected to increase 4 points from the prior quarter to 29 percent as total revenue projections decline. With declining sales outpacing increasing sales, there is further evidence that markets abroad are softening. For the fourth quarter, only 29 percent reported an increase in international sales, down from 43 percent the prior quarter, while 33 percent reported a decrease, up from 16 percent last quarter.
Revenue expectations dim
In the fourth quarter, declining sales outpaced increasing sales, providing further evidence that markets abroad are softening. Only 29 percent of executives reported an increase in international sales, down from 43 percent the prior quarter, while 33 percent reported a decrease, up from 16 percent last quarter. Although projections for total revenue are declining, the contribution of international sales to total revenue is holding steady. Looking at the next 12 months, the contribution of international sales to total revenue is expected to increase 4 points from the prior quarter to 29 percent.
Demand remains top concern
The leading potential barrier to own-company growth over the next 12 months will be lack of demand, cited by 74 percent of those surveyed. Concern about decreasing profitability will weigh heavily, too, as it was cited by 57 percent. Two other concerns about growth over the next 12 months rose slightly this quarter: Capital constraints (34 percent) and taxation (31 percent).
Gross margins tighten
Looking ahead, concern about decreasing margins over the next 12 months rose to 57 percent, reflecting the impact of overall revenue cutbacks. In the fourth quarter, gross margins showed downward momentum: up for 21 percent but down for 39 percent, for a net minus 18 percent. Meanwhile, the spiral of rising costs and prices has ended. Costs increased for 26 percent and decreased for 27 percent, meaning costs decreased for a net minus 1 percent. Prices followed suit: They increased for 20 percent and decreased for 25 percent, for a net minus 5 percent reporting a decrease in prices.
Capital spending plans drop off
Fewer respondents are planning major new investments of capital over the next 12 months–31 percent, down from the prior quarter’s 35 percent. Operational spending increases over the next 12 months are down, too–55 percent, compared with the prior quarter’s 68 percent.
Workforce shrinking
Only 19 percent plan to hire workers over the next 12 months, and 28 percent plan to reduce their staff. More composite workforce layoffs are expected, at minus 2.9 percent, down from minus 0.3 percent in the previous quarter.
Expected barriers to growth over next 12 months:
| 74% |
| 57% |
| 39% |
| 37% |
| 34% |
| 31% |
| 25% |
| 24% |
| 20% |
| 9% |
| 5% |
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 12, 2008 and January 29, 2009.
Demographic profile:
| --Number of participants | 130 |
| --Average # employees | 9,712 |
| --Average revenues | $3.36B |
| --Enterprise revenues | $10.85B |
| --Market capitalization | $8.88B |
For more information about Barometer surveys, including recent economic trend data and topical issues, please visit our web site: www.barometersurveys.com.
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