Most US-based multinationals forecast growth amid sagging economic expectations and uncertainty

Concerns over taxation jump

Survey highlights:

  • Overall, 76 percent of respondents forecast positive revenue growth over the next 12 months. The average projection increasted to 5.5 percent own-company growth rate up from last quarter's 4.4 percent projection.
  • Fewer than half (48 percenet) remain optimistic about the US economy's prospects over the next 12 months, down 9 points from the prior quarter's survey.
  • Legislative/regulatory pressures and lack of demand are the most cited barriers to business growth over the next 12 months; concerns about taxation jumped 19 points over the prior quarter.

PricewaterhouseCoopers interviewed 129 senior executives of US-based multinational companies between May 4, 2010 and August 5, 2010 about their current business performance, the state of the economy and their expectations for business growth over the next 12 months.

Business outlook

Overall, multinational businesses expect to face more varied challenges over the next 12 months, but they remain positive about the prospects for their own businesses. On average, they are planning to spend more and increase their workforces.

Key findings include:

Optimism fades

Looking ahead at the next 12 months, fewer than half (48 percent) of senior executives surveyed are optimistic about the US economy’s prospects, down 9 points from the prior quarter’s survey high of 57 percent. Fourteen percent are pessimistic (up 9 points), and 38 percent remain uncertain.

Optimism about the world economy’s prospects sank 21 points, to 35 percent, with pessimism rising 16 points to 19 percent, and 46 percent expressing uncertainty.

Growth projections belie economic view

Looking at the next 12 months, panelists project a 5.5 percent average growth rate for their own companies, up from last quarter’s 4.4 percent projection. Seventy-six percent forecast positive revenue growth, with 22 percent expecting double-digit growth and 54 percent expecting single-digit growth. Only 5 percent anticipate negative growth in the year ahead.

International sales show fortitude

Looking at the next 12 months, the contribution of international sales to total revenue among those selling abroad is forecast at 30 percent, down 2 points from the prior quarter but up 6 points from a year ago. In second-quarter 2010, 39 percent of panelists who market abroad reported increased sales, and only 19 percent said sales decreased, for a net 20 percent with increased international sales.

Gross margins increase

In the second quarter, 32 percent reported higher margins, and 26 percent said they were lower, for a net of 6 percent higher. Costs went up for 19 percent and down for 17 percent, for a net plus 2 percent, and pricing was up for 20 percent and down for19 percent, for a net plus 1 percent.

Hiring picks up

Within the next 12 months, 43 percent of respondents plan net new hiring (up 6 points), and only 4 percent expect layoffs. The majority plan to stay about the same. The composite workforce for these companies is forecast at plus 1.9 percent.

Investment, spending hold momentum

Thirty-six percent of panelists are planning major new investments of capital over the next 12 months, up 1 point from the prior quarter. Further, they expect to spend at slightly higher levels relative to total sales: a mean investment of 7.6 percent versus 6.6 percent in the prior quarter.

Operational spending increases are planned by 78 percent. Quarter over quarter, new product or service introductions climbed 9 points to 50 percent, and business acquisitions jumped 15 points to 38 percent. Planned M&A activity remains high, at 36 percent, with the major focus on purchasing another business, at 34 percent. Thirty percent are planning new strategic alliances, and 27 percent are looking to expand to new markets abroad.

More barriers to growth

A majority of respondents selected three barriers to growth as the ones to watch over the next 12 months. Up 4 points from the prior quarter, 64 percent said legislative/regulatory pressures could stall growth; inching up 2 points, 59 percent said lack of demand could hurt business; and concern over taxation policies escalated 19 points to 57 percent. More panelists see competition from foreign markets as a possible threat, rising 9 points to 32 percent.

Barriers to business, next 12 months:

  • Legislative/regulatory pressures
  • Lack of demand
  • Taxation policies
  • Decreasing profitability
  • Monetary exchange rate
  • Competition from foreign markets
  • Oil/energy prices
  • Capital constraints
  • Pressure for increased wages
  • Higher interest rates
  • Lack of qualified workers

About this survey:

The PricewaterhouseCoopers Management Barometer Survey is compiled with assistance from BSI Global Research, Inc. One hundred and twenty-nine executives participated in this survey by telephone between May 4, 2010 and August 5, 2010.

Demographic profile:

--Number of participants129
--Average number of employees8,317
--Average revenues$3.26B
--Enterprise revenues$8.71B
--Market capitalization$9.38B

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Dee Hildy