PricewaterhouseCoopers' "Management Barometer" is a quarterly survey
of 130 CFOs and Managing Directors of U.S. multinationals
with average enterprise revenues of $6.6 billion.
NEW YORK, Nov. 30, 2006 (PRIME NEWSWIRE) -- For the third consecutive quarter, senior executives of U.S.-based multinationals are less optimistic about the U.S. economy leading them to reassess their own companies' revenue growth projections for the next 12 months.
For the third quarter of 2006, only 55 percent of executives surveyed for PricewaterhouseCoopers' Management Barometer are optimistic about the domestic economy in the next year, a drop from 59 percent in the prior quarter and off 12 points from the beginning of 2006. Currently, 11 percent are pessimistic, more than double from the prior quarter of 5 percent. The remaining 34 percent are uncertain.
Business leaders have reassessed and lowered their own companies' revenue targets to an average of 7.5 percent over the next 12 months -- off sharply from 8.9 percent in the prior quarter and below the 8.3 percent posted a year ago.
"While cautious about the U.S. economy, executives surveyed seem to have a better view of the global economy with 67 percent stating that they are optimistic -- 9 points higher than last quarter and 13 points higher than 12 months ago," said Greg Garrison, PricewaterhouseCoopers' managing partner of U.S. operations.
Optimistic U.S. Economy Global Economy
3Q 06 55% 67%
2Q 06 59% 58%
1Q 06 67% 72%
New hiring impacted
The growing pessimism and lowered revenue targets appear to be depressing new hiring, which dropped sharply in the third quarter compared to the previous quarter.
Presently, only 46 percent of these multinationals expect to add employees over the next 12 months -- off from 55 percent last quarter and 56 percent a year ago. Those who plan to reduce the number of employees rose 16 percent, up from 7 percent the previous quarter while 38 percent expect hiring to remain the same. Average planned workforce growth is expected to increase 4 percent over the next 12 months. In total, concern over lack of finding qualified workers decreased from 39 percent last quarter to only 26 percent this quarter.
Businesses marketing abroad rebounds
On the positive side, optimism about the global economy rose among businesses marketing abroad, from 58 percent to 67 percent but still lower than the high of 72 percent in the first quarter of 2006. For the third quarter, 52 percent of international marketers increased their sales abroad, with only 4 percent reporting a decrease.
Energy and weak demand noted as barriers
Energy concerns declined ten points from the prior quarter, but senior executives still cited it as the leading barrier to growth. Weaker demand also was top of mind, rising from 30 percent last quarter to 38 percent in the third quarter.
"While concern over oil and energy prices remains a top barrier, the level of concern has dropped from 54 percent last quarter to 44 percent this quarter. Lack of demand, on the other hand, has risen from being the fourth greatest concern last quarter to become the second highest barrier. This may be something to watch in 2007," noted Garrison.
3rd Quarter 06 2nd Quarter 06
-- Oil/energy prices 44% 54%
-- Lack of demand 38% 30%
-- Pressure for increased wages 32% 34%
-- Lack of qualified workers 26% 39%
-- Competition from foreign markets 26% 29%
-- Legislative/regulatory pressures 26% 27%
-- Higher interest rates 24% 28%
-- Decreasing profitability 23% 16%
New investment continues its pace
Despite the drop-off in revenue growth targets, plans for major new investments of capital decreased only slightly; 47 percent plan to spend 8.2 percent of revenues. Among these businesses, information technology (49 percent) and new product and service introductions (46 percent) led as the top two major expected investments.
"The fact that companies are continuing to make planned investments appears to be good news for the long term," said Garrison.
3rd Quarter 2nd Quarter
-- Information technology 49% 45%
-- New product/service introductions 46% 47%
-- Business acquisitions 39% 36%
-- Facilities expansion 35% 37%
-- Geographic expansion 33% 31%
-- Marketing/ Sales promotion 31% 30%
-- Research & Development 30% 31%
PricewaterhouseCoopers' "Management Barometer" is developed and compiled with assistance from the opinion and economic research firm of BSI Global Research, Inc.
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services for public and private clients. More than 140,000 people in 149 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders. "PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
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