Quarterly highlights from the Management Barometer survey show that, despite a falloff in optimism about the US economy's prospects over the next 12 months, senior executives of US-based multinationals forecast steady revenue growth, hiring and spending.
Key findings include:
Optimism about the US economy’s prospects dropped sharply
Looking ahead to the next 12 months, 36 percent of senior executives of US-based multinationals are optimistic that the US economy will grow. The vast majority, 64 percent, are uncertain (43 percent) or pessimistic (21 percent). The sharp falloff in optimism is 22 points below the prior quarter’s 58 percent and 19 points below last year's 55 percent.
Concerns about market demand and profitability rose
Though the cost of oil/energy remains the top concern, unease about the lack of demand (up 18 points to 48 percent) and fears of decreasing profitability (up 15 points to 36 percent) now rival oil/energy prices as leading barriers to growth. Other leading concerns up moderately were legislative/regulatory pressures (41 percent) and lack of qualified workers (35 percent).
Barriers to growth include:
| 49% | (Off 6 points from the prior quarter) |
| 48% | (Up 18 points) |
| 41% | (Up 4 points) |
| 36% | (Up 15 points) |
| 35% | (Up 4 points) |
| 33% | (Up 4 points) |
| 31% | (Up 3 points) |
| 27% | (Off 11 points) |
| 27% | (Up 4 points) |
| 27% | (Up 1 point) |
| 17% | (Up 1 point) |
Expectations for international sales remained steady
Optimism about the future of the world economy held firm at 66 percent, off only 7 points from the prior quarter and in line with a year ago (65 percent). In 3Q 2007, 59 percent of international marketers reported increased sales – slightly off the prior quarter but notably higher than a year ago (52 percent). Looking ahead over the next 12 months, the contribution of international sales to total revenue is projected at a steady 28 percent.
Revenue growth projections also remained steady despite increasing uncertainty about the US economy
An average revenue growth rate of 7.0 percent was projected for their own companies over the next 12 months. This is in line with the 6.9-7.0 percent growth rates of the prior two quarters in 2007, and only somewhat below the 7.5 percent projection a year ago. Currently, 82 percent plan revenue growth, with 28 percent expecting double-digit growth and 54 percent expecting single-digit growth. Those concerned about the cost of oil/energy project a 6.3 percent revenue growth rate vs. 7.7 percent for those who are not, or 18 percent lower.
New hiring plans leveled
Currently, 46 percent plan to add new workers over the next 12 months, down from 52 percent in the prior quarter but on pace with a year ago. Only 11 percent plan cutbacks, in line with the past few quarters, and, overall, workforce growth projections are flat.
Investment plans remained consistent
Major new investments of capital for business growth over the next 12 months are planned by 49 percent, slightly below last quarter's 51 percent and slightly above a year ago (47 percent). However, mean investment dropped to 7.2 percent of total sales, a full point below last year's 8.2 percent.
Gross margins tightened as costs and prices rose
In 3Q 2007, costs and prices increased from last quarter and a year ago. Costs were higher for 55 percent and lower for only 8 percent, a net 47 percent with higher costs. Prices increased for 42 percent and decreased for only 8 percent, a net 34 percent with higher prices. Gross margins were higher for a net 2 percent (29 percent higher, 27 percent lower) – a year ago, gross margins were up for a net 8 percent. Concern about decreasing profitability as a barrier to future growth is a reflection of this squeeze in gross margins.
For a complete look at the key indicators for the business outlook, download the full Management Barometer 3Q 2007 Business Outlook report.
About this survey:
One hundred and thirty-two executives participated in this survey by telephone between August 1, 2007 and October 30, 2007.
Demographic profile:
| --Number of participants | 132 |
| --Average # employees | 8,168 |
| --Average revenues | $3.14B |
| --Enterprise revenues | $7.67B |
| --Market capitalization | $11.24B |
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