Trendsetter barometer®
Business outlook
3Q 2015
What’s inside:
At a glance
Economic sentiment
Corporate performance
Opportunities and barriers
Hiring
International expansion
Contents
At a glance
1
Economic sentiment
2
Corporate performance
4
Opportunities and barriers
6
Hiring
9
Confidence drops. Fast.
Companies still posting strong results, though margins are weakening
New worries limit capital expenditures, mergers, and more
Businesses pull back on hiring plans, but wages inch higher
International expansion
Sales in foreign markets fall amid growing pessimism
Trendsetter barometer – Business outlook
11
Well, that was interesting. Last quarter, major stock exchange indices turned in their worst results in four years,
after concerns about a softening Chinese economy. We had prolonged uncertainty about the Fed’s interest rate
decision, a Syrian humanitarian crisis that now directly affects Europe, and domestic political surprises that signal
trouble for insiders. US economic fundamentals remain strong, but markets and executives like predictability, and
that’s not what we’ve been getting lately.
In our 20 years of surveying Trendsetter executives, we’ve had lots of opportunities to see how they respond
to extremes — and this is often a useful predictor of future economic activity. So, how have they reacted this
past quarter?
Like game show contestants with fingers on buzzers, they’ve reacted to the negative signals with lightning speed.
Trendsetter growth forecasts are down, so are plans for capex spending, hiring, and more. It doesn’t help that
we’ve entered a contentious 2016 election season (even before Election Day 2015 rolls around). This quarter, we
asked how politics might affect business and heard some strong opinions. It all comes down to a delicate balancing
act: preparing for potential problems even while taking advantage of the abundant opportunities that still exist.
We’ll soon know if Trendsetter companies’ third-quarter jitters are just temporary or the signs of a renewed period
of caution. Either way, we’ve learned that when Trendsetter leaders talk, it’s important to listen, since their collective intuition is quite often prescient about where the economy is heading. This report presents what we’ve learned
about their forecasts, attitudes, and planned activity — insights we obtained through conversations with 220
executives in the third quarter of 2015. We’re grateful for their input and, as always, pleased to share it with you.
Trendsetter barometer – Business outlook
Ken Esch
Margaret Young
Trendsetter Partner Sponsor
Private Company Services
Partner
Private Company Services
At a glance
Private-company sentiment has gone up (é), down (ê) or
stayed the same (=) across a variety of areas
Optimism about the US
economy is felt by 64% of
private companies, down
from 70% the prior quarter.
Economy
ê
é
Pessimism about the world
economy is felt by 20% of
international marketers, up
from 9% a year ago.
ê
Improved pricing power
is reported by 19%, down
from 26% the prior quarter.
ê
Just roughly two-thirds
(65%) plan to increase
operational spending,
down from 74% a year ago.
é
At 3.08%, planned
wage increases are up
from 2.62% at the start of
the year.
ê
9% are concerned
about lack of capital for
investment, down from
17% a year ago.
ê
Just over one-quarter
(27%) reported increases
in international sales,
down from 34% in mid-2014.
Performance
Expected revenue growth
is 8.7%, down from 9.8%
the prior quarter.
Just one-quarter
(25%) plan major new
investments, down from
36% the prior quarter.
Just slightly more than
one-half (56%) plan to
hire, down from 64% in the
second quarter.
Over one-quarter (28%) of
private companies worry
about wage pressure,
up from 18% at the end of
last year.
Sales abroad contributed
18% to overall revenue,
essentially the same as the
past few quarters.
Trendsetter barometer – Business outlook
ê
Spending
ê
Hiring
ê
Headwinds
é
Expansion
1
Economic sentiment
Confidence drops.
Fast.
When you work with statistics,
you look at any data point in the
context of history and expectations.
Knowing your factory has a 5%
defect rate doesn’t, by itself, tell you
much. But if you also know that last
month’s rate was 0.01% and that
the rate soared two weeks ago, the
information is a lot more meaningful. Fortunately, the Trendsetter
Barometer Business Outlook
gives us two decades of data for
comparison.
“Global uncertainty makes for an unstable economy.”
—EVP, engineering and technology company
Optimism about the US economy – Before and after the
Chinese yuan devaluation
Private-company optimism
3Q15 net
64%
56%
After Aug. 10
77%
Before Aug. 10
Percentages denote private companies who are optimistic about the US economy's 12-month prospects.
The long view – Economic optimism over time
Confidence drops. Fast.
Percentage of respondents
In the third quarter of 2015, 64%
of Trendsetter executives voiced
optimism about the US economy.
This is down from 71% at the start
of the year, but it’s hardly a rout.
During the first three quarters
of 2007, the drop was decidedly
more significant, with confidence
plunging nearly 20 points. And then
the sky fell. We’d be Chicken Little
if we predicted anything as dire as
that now.
80%
60%
40%
20%
0%
3Q’06
3Q’07
US economy
3Q’08
3Q’09
3Q’10
3Q’11
3Q’12
3Q’13
3Q’14
3Q’15
World economy*
* World optimism reflects responses only from private companies selling internationally.
Trendsetter barometer – Business outlook
2
Economic sentiment
And, well, confidence was really
quite high at the start of the third
quarter, with 77% of Trendsetter
executives feeling upbeat about
the US economy — the last time
it approached that level was in
early 2006. Meanwhile, not a single
respondent voiced pessimism
during the first half of 3Q. (In the
20 years of our survey, we’d never
before seen pessimism bottom out.)
But that was before August 10.
And then the Chinese government
announced an unexpected devaluation of the yuan relative to the US
dollar. Over the next seven weeks,
the percentage of Trendsetter
executives expressing optimism
dropped 22 points to 56% (netting
at 64% for the quarter overall),
with roughly another one-third
voicing uncertainty and 6% saying
they were pessimistic by the end of
the quarter.
We saw a similar plunge in
world-economy sentiments among
Trendsetter companies that sell
abroad: After August 10, their
optimism fell from 49% to 29%,
and their pessimism rose from 9%
to 25% (netting at 36% and 20%
respectively for the quarter).
Trendsetter barometer – Business outlook
“Although companies have grown
increasingly realistic about the
limitations of the Chinese market, I
don’t think most of them expected
the magnitude of August’s events,”
says PwC’s Ken Esch. “You can see
their uneasiness in newly conservative forecasts and spending plans.
It’s a reminder of how interconnected our modern economy
is; even private companies that
operate exclusively in the US are
affected by what happens in China.”
It’s too early to call this a downward
trend. That said, we may see
somewhat slower GDP growth in
2016: Trendsetter executives’ view
of the US economy’s 12-month
prospects has frequently been a
good leading indicator for annual
US GDP growth. So, Fed-watchers,
take note. Meanwhile, though,
Trendsetter companies are maintaining their cool. “It seems that the
economy should keep moving along
at a slow rate,” the owner of a car
dealership told us. “As long as that
happens, we will be okay.” Or, as
the president of a process engineering company put it, “We are over
the paranoia.”
Economic barometer – 12-month outlook
US economy
World economy*
64%
6%
30%
36%
20%
44%
Optimism
Pessimism
Uncertainty
* Optimism about the world economy reflects responses only from companies selling internationally.
3
Corporate performance
“If Congress can work together, that will fuel some
continued growth.”
—VP, Construction management firm
Companies still posting
strong results, though
margins are weakening
Given how quickly attitudes are
shifting about the economic
forecast, it’s easy to imagine that
private-company revenues would
be under a lot of pressure. But, at
least for now, that’s actually not the
case. In fact, Trendsetter corporate
performance forecasts continue to
be remarkably strong, even though
they’re down a bit from peaks hit
earlier this year. As the senior vice
president of a tools and hardware
company puts it, “New customers
and acquisitions will help drive us.”
Private companies forecast slightly lower revenue growth
than a year ago
12-month revenue growth rate*
Trendsetter barometer – Business outlook
9.0%
Forecast in 3Q14
* Projected
Growth expectations
Most private companies project revenue growth for the next 12 months.
Over one-third expect double-digit growth.
Performance holding up
Eighty-six percent of Trendsetter
leaders say their companies’
revenue will grow over the next
12 months — a near-high since
the recession (in that time, we’ve
seen this number inch higher on
just three occasions). But they see
a slowdown in the rate of growth.
The average company in our survey
predicts an 8.7% revenue increase
over the next 12 months, a figure
that hasn’t fallen below 9% since
8.7%
Forecast in 3Q15
3%
6%
5%
35%
Positive growth 10%+
Positive growth less than 10%
Zero growth
Negative growth
Not reported
51%
4
Corporate performance
mid-2014. Still, 8.7% growth is
nothing to sneeze at.
And these companies think
their peers will have relatively
strong results, too: 81% foresee
industry growth, and this is the
second highest assessment in
seven years. Trendsetter businesses
forecast lower growth rates for
their industry peers (5.5%) than for
themselves — but again, these are
forecasts that would please most
companies in most quarters.
Softening margins — another
headache for the Fed
To the degree that there are any real
concerns in the current Trendsetter
corporate performance forecasts,
we’d highlight gross margins. In the
time that we’ve been asking about
margins, starting in 2001, more
companies have said their costs
have gone up than said their prices
have risen — until the past year.
The recent inversion showed private
companies exercising unusual
pricing power, while low energy
Trendsetter barometer – Business outlook
prices kept their costs in check.
But this quarter, they reverted to
the norm: 29% said that costs had
risen, while only 26% were able to
sustain a price hike. It’s yet another
sign that we may be pulling back
from a peak.
This is another case where Trendsetter Barometer is a useful indicator:
Private-company pricing typically
moves in line with annualized quarterly US Producer Price Index (PPI)
growth. As PwC’s Margaret Young
points out, “The fact that fewer
companies said they raised prices
this past quarter is consistent with
the ongoing weakness we’ve seen in
PPI reports. It’s one more complication for the Fed as they try to decide
when to raise interest rates.”
This is something our survey
participants are watching closely,
with half of them telling us that
the raising of interest rates by the
Fed ranked high in importance
for their businesses and the
economy overall.
On the same pricing page
Trendsetter price movements tend to coincide with changes in the
producer price index, indicating what the broader market will bear.
US producer price index quarter-overquarter annualized
% of Trendsetter companies that raised
prices in the past thee months
15%
30%
10%
20%
5%
10%
0%
0%
-5%
-10%
-10%
-20%
-15%
-20%
-30%
2008
2009
2010
2011
2012
2013
2014
2015
Source: PwC’s Trendsetter Barometer quarterly survey question: “In the past three months, have your own
prices gone up, down or stayed the same?”
Oxford Economics / Haver Analytics
The numbers in the right Y-axis are the percentage of Trendsetter respondents saying prices went “up” minus
the percentage saying “down.”
5
Opportunities and barriers
“Our business depends on housing. When the Fed raises rates, that
will mean less money in everyone’s pockets.”
—Controller, Plastics manufacturer
New worries limit
capital expenditures,
mergers, and more
One of the lessons companies have
learned from the turmoil of the
past decade is that in tough times
it helps to have a good handle on
fixed versus variable expenses.
Nobody knows for certain whether
this particular challenge with
China (or anything else) will have
a serious, long-term effect on the
economy. But if you’re agile, you
can put a new plan into place
quickly. Here, private companies
may have an advantage, because
they aren’t signaling their intentions ahead of time.
Financing is still very
affordable…
Last quarter, we observed that interest rates were low, and companies
were taking advantage to boost their
liquidity, refinance debt, or make
other structural moves. This is still
true: 23% said they took out new
bank loans in the recent period (the
most since 2001), and 9% said they
had new credit terms with suppliers
(the most since 2003). And it’s easy
to see why: Money is cheap.
Trendsetter barometer – Business outlook
Seeking new financing while interest rates remain
historically low
In 3Q 2015, nearly one-quarter of private companies initiated new
financing while money remained cheap and speculation grew about
whether the Fed would raise rates this year.
% of private companies
initiating new financing
in past 3 months
Today
Interest rates private
companies are paying for
bank financing
23%
3.32%
21%
3.57%
Last quarter
Trendsetter executives told us
they’re now paying 3.32% on average for their bank borrowing. This is
a fairly dramatic 25 basis point drop
from the previous quarter; in fact,
this is the lowest rate we’ve seen
since we started this survey. During
the quarter, many thought the Fed
would raise rates in September,
so there was some extra pressure
to act. As long as good terms are
available — and for the most
part, they are — new borrowing
is understandable.
We should note, though, that
banks weren’t rolling out the red
carpet for everyone. For 4% of the
6
Opportunities and barriers
respondents, credit became less
available in the third quarter. And
while this isn’t a huge number, it’s a
large jump from the 1% we saw in
the second quarter. The last time we
saw a jump of this size? Late 2009.
So banks, too, are trying to become
more agile; they’re making deals
when the deals make sense, but
they’re also tightening standards in
a hurry where needed. At the same
time, other sources of capital have
been drying up; the spread between
corporate and Treasury bonds is
now higher than it has been in a few
years. Trendsetter companies don’t
seem to be in denial about further
tightening. An underlying apprehension is suggested by over half
of them having flagged increased
capital availability as something of
high importance to their businesses
in the next couple of years
…but there’s little appetite
for strategic moves
A few other markers show how
sensitive Trendsetter executives
have become to the possibility of bad news. We always ask
companies if they’re planning any
major new capital expenditures
Trendsetter barometer – Business outlook
in the coming year. Since the
recession about one-third have
said “yes,” on average, and last
quarter the number was slightly
above that. This time, though, the
average for the period skidded
to 25%. In two decades of asking
this question, we’ve never seen
the average fall so far, so quickly.
Curiously, forecasts for operating
expenses barely contracted; it’s
as if companies are comfortable
with current spending but wary of
larger commitments in the face of
heightened uncertainty.
Fewer private companies plan to invest in growth activities
25%
Major new capex
35%
Increased operational
spending
New joint ventures
Acquisitions
65%
74%
12%
17%
10%
16%
Today
(3Q 2015)
A year ago
(3Q 2014)
Percentages denote the number of companies who plan to spend on these activities in the next 12 months.
We also see private companies
pulling back when it comes to
mergers and strategic alliances.
There’s still activity, to be sure —
45% of Trendsetter companies plan
to make some significant moves.
But this is well below average.
Only 9% said they’ll expand to new
markets abroad in the coming year,
the second lowest we’ve ever seen.
Buying another business? Only
10% plan to do this, even though
interest rates are low and financing
is plentiful. These simply aren’t risks
that many private companies are
prepared to take, given the sudden
uncertainty in the market.
7
Opportunities and barriers
PwC’s Ken Esch says that this pulling
back is probably a kneejerk reaction
rather than the start of a new trend,
but notes that “the leading private
companies we work with aren’t
skittish this way. In a challenging
business landscape, they seize
opportunities that other companies
don’t notice or else are too gun-shy
to pursue. Private companies also
have the luxury of a longer-term
view and a willingness to make
good investments while economic
fundamentals remain sound.”
Finally, our panel set some new
records when talking about the
factors that might impede growth in
the coming year. One direct effect
of the yuan devaluation is to make
Chinese goods cheaper, relative to
American-made products. So, it’s
not too surprising to see a spike in
concern about competition from
foreign markets. But the jump in the
percentage of Trendsetter executives who worry about this, from
11% to 15%, is the second largest
such movement in a decade.
And with the US economy performing so strongly relative to the rest
of the world, there’s a lot of cash
flooding in from investors who
have nowhere else to go. There’s
Trendsetter barometer – Business outlook
so much demand for US Treasuries
that, in the first 4Q15 auction of
three-month T-bills, the yield hit
0% for the first time ever. Even 0%
seemed better than the alternatives.
So, it’s logical that 21% of Trendsetter executives would be concerned
about the strength of the US
dollar. This is actually the second
highest level we’ve seen in 15
years — at the end of 2014, only 8%
of respondents had this concern,
which was the second lowest rate
we’d seen in two decades.
Will politics have an effect?
Over the next year, we’ll hear a
lot from politicians and advocacy
groups about how to improve the
business environment. The prevailing wisdom, of course, is that one
party will be more accommodating
than the other. And many of the
hot-button issues are not new —
we’ve heard them debated in past
presidential election seasons. For
instance, there’s reduced government regulation (46% of the panel
said this was important to their
How important will the 2016 elections be to private
companies’ growth agenda in the next several years?
32%
31%
Very important/critical
Moderately important
Unimportant
37%
Percentages denote the number of companies making each response.
8
Opportunities and barriers
business) and modified energy
policies (40% consider this important to their business, while 49%
said it was critical for the economy
overall) — issues that tend to be
identified more with candidates on
the right.
But it’s useful to remember that
one person’s incentive is another
person’s handout. Infrastructure
spending, cited by 56% as critical
to the economy (and by 51% as
being important to their businesses
specifically), would seem to be a
priority for both parties, even if
they stumble over funding sources.
But the biggest election-season
issue by far for these companies
is tax reform, with 70% saying
it’s important for their businesses
and 58% saying it’s also critical for
the economy generally. This issue
attracts candidates on the left and
the right, even as they define it
differently. Last but not least, there’s
strong demand (60%) for incentives
for more manufacturing in the US.
Bringing more production back
home could solve a number of
issues, and private-company leaders
will doubtless welcome a new round
of manufacturing policy proposals.
“Bringing manufacturing back
to the US isn’t just a matter of
campaign rhetoric,” says PwC’s
Margaret Young. “We’re seeing
a growing number of companies
looking to return production home,
ranging from textiles businesses to
OEMs and beyond. If companies
can make the numbers work,
manufacturing in the US is a logical
way to speed up their supply chain
and sales.”
Big picture, nearly one-third (31%)
of Trendsetter companies say that
the 2016 elections will be either
critical or very important to their
company’s growth agenda and
business planning over the next
several years, with roughly another
one-third (37%) saying the elections will be moderately important
in this respect. Few companies,
however, are delaying decision
making to wait for the election
outcome (a mere 11%). As the
senior vice president of a tools and
hardware distributor puts it, “As
long as the economy keeps moving,
it doesn’t much matter who wins.”
Election 2016 — Top issues for corporate and economic
growth, as private companies see it
70%
Tax reform
58%
52%
Increased capital
availability
45%
51%
56%
Infrastructure spending
by gov & industry
51%
48%
Fed raising interest rates
49%
Incentives for more
manufacturing in the US
60%
46%
41%
Reduced regulation
Incentives for capex
spending
45%
30%
40%
US energy policy
49%
33%
Long-term funding of
social security
52%
32%
Fair trade agreements
with Asia
43%
Free higher education
27%
23%
Minimum wage increase
25%
23%
Immigration reform
resulting in more
qualified US workforce
23%
26%
Important to own
company’s growth
Very important/critical
to US economic growth
Percentages denote the number of companies that consider these issues important.
Trendsetter barometer – Business outlook
9
Hiring
Businesses pull back on
hiring plans, but wages
inch up
“Although fuel prices have dropped, labor costs have risen.”
—CFO, Logistics services company
“You should be dancing!” This was
not the response to the latest two
jobs reports. Even with unemployment at 5.1%, most economists
were disappointed. That’s because
there are actually two ways to
lower unemployment: the good
way (more people hired from a
labor pool), and the other way
(the same number of people hired
from a smaller labor pool). When
people give up on looking for work,
the labor pool shrinks. And this
is where we find ourselves now:
Last quarter’s hiring was far below
most analysts’ expectations, and
the last time we saw a labor force
participation rate this low (62.4%),
Saturday Night Fever was playing
at the drive-in. As we’ve observed
before, our economy is increasingly
polarized, with winners and losers.
Staying alive
So while the labor market is, yes,
alive, it’s not abundantly well. And
it probably won’t get much better
any time soon. Over the past 20
Trendsetter barometer – Business outlook
The majority of private companies plan to hire in the next
12 months
4%
Hire new workers
Keep workforce the same
Reduce headcount
40%
56%
years of conducting our Trendsetter
Barometer survey, we’ve found that
what private-company executives
tell us about their own hiring intentions is often a leading indicator
of payroll changes at companies
in general. This time, only 56% of
Trendsetter executives say they
plan to add jobs, a pretty dramatic
drop from the second quarter’s 64
percent. And they don’t expect to
add many jobs, at that, expecting to
grow their workforces by an anemic
2.2%, below long-term averages.
10
Hiring
Wage increases pick up
the pace
When we drill into this further, we
see even more polarization: The
product/manufacturing companies
in our survey have been trimming
their hiring plans (1.4%, down from
2.1% in the second quarter), while
service companies are expanding
theirs (4.3%, up from 3.8% last
quarter). And as you might expect,
these are different kinds of jobs.
Nearly half of the service companies
that are recruiting seek technology
workers. To the extent that product/manufacturing companies are
hiring anyone, their highest priority
is to fill the blue collar ranks.
For workers who do get hired by
these companies, there may be
better pay. Since mid-2008, private
companies have kept their planned
wage increases under 3%. But
now, for the first time since the
recession, private companies are
saying they intend to raise wages
above that mark, to 3.08%. “Even
though our survey focuses on
private companies, it has broader
implications,” says PwC’s Margaret
Young. “We’ve seen over time that
Trendsetter barometer – Business outlook
Trendsetter wage predictions have
been a leading indicator of annual
growth in the US employment cost
index. So, there’s a good chance
that wages will continue to inch
upward in the larger workforce.”
At the same time, however, 28% of
Trendsetter executives told us that
pressure for higher wages could
limit business growth in the coming
year, the highest percentage to say
this since the recession. Pressure
for more pay at the bottom of the
scale tends to push up everyone’s
wages; for companies in lowmargin industries, this can be a real
challenge. Product companies, in
particular, are concerned — 32%,
up from 14% a year ago. But leading
businesses also clearly understand
that growth will be elusive without
the right workers, and one way to
attract and retain such workers is to
pay them well.
About one-quarter of our panel
identified raising the minimum
wage as an election issue that
was of high importance to both
the economy overall and their
businesses in particular. Roughly
one-quarter also said this about
Less help wanted, but for more pay
Which workers are most in demand?
56% of private
companies plan to
hire in the next year
18%
of companies seek
marketing & sales
professionals
35%
Planned workforce increase
Today
Prior quarter
2.2%
2.6%
Planned wage increase
Today
Prior quarter
3.08%
2.97%
reducing the cost of college and
bringing more qualified workers
to the US through immigration
reform. Says the CFO of a software
consulting firm, “We could grow
more if we had better immigration
laws. We get a lot of our people
from India.” But twice as many
Trendsetter companies (53%)
of product
companies seek
blue collar workers
40%
of service
companies seek
technology workers
see long-term funding of Social
Security and Medicare (what many
people will rely once they’ve retired
and said goodbye to their paycheck
and benefits) the bigger — and
looming) problem for the country.
If it’s not resolved, it could crowd
out many other spending priorities
in the future.
11
International expansion
“Trade agreements need to get signed and ratified. Congress and the
President are moving too slowly.”
—CFO, logistics services business
Sales in foreign
markets fall amid
growing pessimism
One of the biggest stories of the
summer was the continued contagion in global markets, based on
concerns that China’s economy
might be weaker than expected.
For an unfortunate illustration of
the problem, consider Trendsetter
companies’ own experience with
international sales. A year ago,
5% of these businesses said their
international business had fallen
in the previous quarter. Now,
the decliners have reached 20
percent. This is the highest level
we’ve seen since the recession,
and it confirms that the global
economy is making real waves
here at home, too.
We noted earlier that 64% of
all Trendsetter companies felt
optimistic about the US economy
last quarter. Curiously, companies
with international sales were
actually slightly more optimistic
about the US economy than
their domestic-only peers — but
this masks a very big detail. Ask
Trendsetter barometer – Business outlook
Nearly half of Trendsetter private companies
sell internationally
51%
International markets
United States only
12%
Emerging markets*
49%
Private-company revenue from international sales
Market presence
International markets
generally
Emerging markets*
specifically
Percentage of total revenues
derived from international sales
18%
37%
* Here, the term emerging markets refers to Brazil, China, and India only.
12
International expansion
businesses who sell abroad, say, but
have no emerging markets presence; two-thirds of them feel good
about the US economy’s outlook.
But if you ask businesses with
exposure to China, India, or Brazil,
less than half (48%) say this, down
from 67% just three months earlier.
Companies that sell in
the emerging markets
are different
PwC’s Ken Esch explains: “For the
first group – the companies that
aren’t selling in emerging markets
— international activity is often
more of a sideline, representing just
12% of sales in the recent quarter.
The Trendsetter companies that sell
in emerging markets are a different
story: Global sales are an essential
part of what they do.” For example,
with companies that have a sales
presence in China, two of every five
revenue dollars came from abroad
last quarter. So the attitudes, investment choices, and hiring plans of
these companies are closely tied to
what they see outside the US. When
they get worried about what they
Trendsetter barometer – Business outlook
see abroad, they easily extrapolate
to the rest of the market.
We’ve consistently made the case,
however, that the companies with
emerging markets exposure are
in it for the long haul. True, their
optimism has taken a hit; attitudes
toward the US economy (67% "
48%) and the global economy
(33% " 22%) have soured
quickly. Revenue growth rates have
declined too (11.7% " 9.7%),
but those rates are still enviable
for most other Trendsetter businesses. And while these emerging
market Trendsetter companies are
slamming on the brakes for major
capital investments, they’re actually
increasing their operating expenses.
Not to mention that the percentage
of these companies intending to
spend more on new products and
services has more than tripled
since the second quarter. They also
report higher planned spending on
IT, facilities expansion, business
acquisitions, and more. By contrast,
other Trendsetter companies are retrenching in nearly every category.
International companies plan to be more growth-focused
than their peers over the next 12 months
Plan major
capital investments
Plan increased spending on
new product/service innovation
Plan increased
spending on R&D
34%
33%
21%
17%
15%
6%
International
Domestic only
Percentages denote the number of companies planning these expenditures.
The Trendsetter companies in the
emerging markets group may also
get some help from Washington,
depending on how negotiations
proceed. One-third of the companies we asked said fair-trade
agreements with Asia really matter
to their business. As the CFO of a
transportation company told us,
“The Trans Pacific Partnership
agreement is critical for our Far East
business.” But this clearly affects
some companies more than others.
Seeing as how nearly all candidates
in both parties have expressed
opposition to the trade deal, it’s too
soon to know if these companies
will get the help they want.
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About this report
Since 1995, PwC’s Trendsetter Barometer Business Outlook has tracked
the views of top executive officers at privately held US businesses and
the trends these reveal. This quarter, we spoke with 220 chief executive
officers (CEOs/CFOs), including 130 from companies in the product sector
and 90 in the service sector.
How the Trendsetter companies break down
• Products 59%
–– Manufacturing 26%
–– Trade/Distribution 15%
–– All other 18%
• Services 41%
All (220)
Product (130)
Service (90)
Average number of employees
1,110
1,365
741
Average enterprise revenues
$392 million
$474 million
$273 million
Five-year growth rate
71%
77%
63%
Survey interviews were conducted by the independent research firm BSI
Global Research, Inc. by phone between July 6, 2015 and October 7, 2015.
The same companies are interviewed and tracked from quarter to quarter,
with occasional changes to the survey population due to turnover.
Trendsetter barometer – Business outlook
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Trendsetter Barometer Outlook
To find out more about private-company trends and to discuss the survey
findings, please contact:
Ken Esch
Margaret Young
Trendsetter Partner Sponsor
ken.esch@pwc.com
Partner, Private Company Services
margaret.g.young@pwc.com
About PwC’s Private Company Services Practice
To see more charts and graphs,
including those showing trends
over a span of years, and to
download the complete survey
findings, go to our website:
http://www.pwc.com/us/en/
private-company-services/
publications/pcs-trendsetterbarometer.jhtml
Located in all major U.S. markets, PwC’s Private Company Services
(PCS) is a national practice with more than 170 partners who provide
tax, audit and advisory services especially for private companies, their
owners and high net worth individuals. More than 60 percent of America’s
largest private companies are PCS clients.* They span a broad range of
sectors and industries, from manufacturing to retail, and industrial to
professional services.
A hallmark of PCS is a robust thought leadership program that provides
clients with timely, thought-provoking information to help manage and
grow their businesses and wealth.
Visit us online at pwc.com/us/pcs
* Forbes America’s Largest Private Companies 2015
© 2015 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to
PricewaterhouseCoopers LLP, which is a member firm of PricewaterhouseCoopers International
Limited, each member firm of which is a separate legal entity. 85163-2016
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