Private-Company CEOs More Optimistic Heading into 2014

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In Latest 12-Month Forecast, Growth Targets Strong, Hiring Remains a Barrier

  • 43 percent of private companies signal confidence in the world economy, the highest level since the first quarter of 2011
  • 8.5 percent growth is projected for the next 12 months, up from 7 percent a year earlier (fourth quarter 2012) and outpacing forecasted US GDP growth
  • 57 percent of private companies plan to hire workers in 2014

Private-company CEOs’ optimism as they enter 2014 is fueling growth and hiring plans for the year ahead, reports PwC US’s latest Private Company Trendsetter Barometer. Their optimism about the US and world economies has risen significantly since a year ago, particularly regarding the world economy. Forty-three percent of private-company CEOs say they are confident about the global economy – the highest level since the first quarter of 2011.

While 51 percent of respondents nonetheless remain uncertain about the world economy, their ambivalence is not deterring business activity. Private companies believe markets are strong enough to support their corporate agendas, both in the United States and abroad, according to Trendsetter Barometer. Almost one-third of respondents are planning major new capital investments in 2014, while nearly one in five are looking to acquire new businesses, compared with just 11 percent a year ago.

Optimism about the economy is also driving ambitious revenue goals for private companies in 2014. CEOs project growth of 8.5 percent over the next 12 months, up from 7 percent a year ago, with over one-third of respondents saying they expect double-digit revenue growth. Projected increases in private-company revenue continue to outpace forecasted US GDP growth, which is expected to be roughly 3 percent for 2014.

“The optimism expressed by private-company CEOs at the end of 2013 for the year ahead is an encouraging sign that our economy continues to strengthen, especially compared with this time a year ago,” says Ken Esch, a partner in PwC’s Private Company Services practice.

Rich Stovsky, leader of PwC US’s Private Company Services practice adds: “We see that our clients are looking past economic and legislative uncertainty to move ahead with critical decisions, such as making new capital investments and expanding their businesses. Clearly, private-company leaders recognize that the external environment needn’t stall plans indefinitely, and so we encourage companies to keep considering a range of actions they might take to fuel sustained, long-term growth.”

Private Companies Are Looking to Hire, But Qualified Workers Are Hard to Find

Hiring is an important factor in delivering on private companies’ growth plans. To that end, the majority (57 percent) of private companies surveyed are looking for new employees. Meanwhile, only 45 percent of respondents are operating at full capacity – a situation that could be improved by bringing the right workers on board. Private companies say they aim to increase their composite average workforce by 1.9 percent, as well as pay their employees more this year, predicting a median hourly wage increase of 2.7 percent over the next 12 months.

Despite demand and planned wage increases, qualified workers have remained hard to find, with over one-quarter of private companies citing this as a barrier to growth. People with technology and engineering skills are in particularly high demand, as companies look to invest in innovation and do more with less. More service companies than product companies (35 percent vs. 24 percent) cite the need for technology aptitude, although the latter companies – including manufacturers – increasingly cite the need for workers with STEM abilities. Nearly one-quarter of the product companies surveyed say they need blue collar workers possessing specialized skills.

“Businesses are at an important inflection point with their workforce, particularly in specialized sectors like manufacturing,” says Esch. “They are losing knowledge and skills when older workers move on, while simultaneously requiring specialized skills from the workers who replace them. Although the talent gap is not a new issue, it may become increasingly problematic for private companies – and society at large – if they don’t find creative ways of addressing the challenge.”

Additional Survey Findings

  • Banking activity saw an appreciable uptick, with almost one-quarter of private companies reporting new financing in the final quarter of 2013, up 10 points from a year ago.
  • International sales are projected to account for nearly one-fifth of annual revenue for private companies that sell outside the United States.
  • International companies are spending more on key growth activities than domestic-only companies are. More than three times as many international companies are investing in R&D, while twice as many are spending on new products/services and business acquisitions.

From: PWC

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