By Michael F. Carmichael
Aug. 4, 2011
Corp! magazine, in partnership with the Business Improvement Team and Business Research Group, conducted the Corp! Business Trends Survey, a longitudinal survey that tracks the opinions of business owners and company executives on the economy.
In this exclusive Corp! survey of leaders from a broad spectrum of the business world, more than half anticipate the economy as a whole will increase moderately during the second half of this year. We’ve included a few of their comments throughout this report.
As reflective of their leadership status (more than 75 percent were at least at the level of executive vice president with the majority CEO or chairman), all had definite opinions of what the next six months will hold for their company, their business sector and their regional economy.
In its report on the second quarter’s national economic activity that was issued late last week, the government’s Bureau of Economic Analysis (BEA) agreed that the economy was improving, albeit slightly. The country’s Gross Domestic Product went from an adjusted .4 percent increase in the period from Q1 (January through March) to a 1.3 percent increase for Q2. The increase, according to the BEA’s analysis, reflected a decrease in imports and growth in federal spending but was affected by a “sharp deceleration in personal consumption expenditures.”
How everything will be affected by recent legislation curtailing federal spending is, of course, unknown.
The Corp! survey is ongoing and, should there be significant changes, we’ll be back with an update.
Nearly 8 out of 10 believe growth will come from good old American innovation, which will lead to increased sales. Companies from small to large are anticipated to contribute those innovative ways of doing business through new products or other means.
“Key drivers are innovation and job creation-¦ .”
While average wages will remain the same, nearly half of survey respondents predict the cost of production will rise moderately, while a third think it will remain the same.
Financing and Taxes at a Macro Level
Financing options are predicted to remain the same by half of our respondents, while more than a third anticipate greater availability of investment capital.
Another economic bright spot anticipated by our respondents is the amount of overall business taxes - with more than a third predicting they will decrease moderately and nearly 4 out of 10 saying they will stay essentially the same.
The concept of alternative energy is gaining traction; with more than half saying they believe it will increase either moderately or even sharply, with one-third believing that the current level of interest will continue.
“Green initiative research increasing -¦ .“
Unexpected Sectors Growing
We asked which particular business sectors would lead the anticipated moderate growth in their state and a surprising 6 out of 10 answered that tourism, travel and dining would top their list. We gave them the option to provide multiple answers, so both the manufacturing sector and the sector that includes professional, scientific and technical services attracted the nod of our respondents as the next greatest contributors to our moderate economic growth.
Not surprisingly, given the current state of the real estate market, a quarter of our respondents anticipate that the construction and real estate sectors will decrease moderately.
Even with projected or existing funding cuts, higher education as a sector was seen by 7 out of 10 of our respondents as staying the same or growing moderately during the second half of the year.
“Everyone’s complaining [commented one respondent, meaning both his customers and his competitors] - and, as a leader, [I know] that’s a sure sign that there is shared sacrifice for the good of the whole-¦ .“
A Need for a Change in Thinking
We asked some respondents about questions we hadn’t asked and the responses we got seemed to reflect the thoughts of many as reported in national polling. Two examples:
The lack of leadership and consensus in our federal government is causing a ripple effect of uncertainty for our economic trends. This environment stifles decision making in the business community. Further, this delays decision making, sales cycles and can result in no decisions being made.
However, the current approach in our state government is providing a clearer approach to the future. We believe that this is providing the foundation for consistent growth going forward.
The biggest influence we can have is to do it ourselves and not wait for someone else to do it for us. Fear should not rule the day!
The greatest influences on the economy today are increased spending by government at all levels, decreasing revenues to support that spending, a moribund housing sector where value continues its slide, perpetually high unemployment that is not accurately reflected in official statistics, businesses that fail to create jobs in the U.S. and a general disinterest on the part of citizens to look at outside-the-box solutions to these challenges. No one wants to discuss systemic change, but that is what we need if we are to survive and start to rebuild a broader based economic engine.
Focusing on Their Own Business
When asked to think more narrowly about their own company, our respondents were almost bullish. Two-thirds anticipate new orders will increase moderately or even sharply with only 10 percent anticipating a moderate decline.
“Customers are opening up to new orders faster than in 2010-¦ .“
A similar pattern emerges when asked about their company’s innovation, with 9 out of 10 planning to rely on it as a major contributor to their economic growth.
Growth may come at the expense of an increase in hours worked, with 9 out of 10 planning to have to work at least as hard if not harder in the coming months. Internal production, however, doesn’t seem to suffer from increased outsourcing, as more than two-thirds plan to keep things in-house at current levels.
“-¦ work force readiness-¦ .“
Total organizational compensation is anticipated to rise at 4 out of 10 companies in our survey and stay the same in slightly more than that - a much better result for employees than the slightly more than 10 percent whose salaries will either decline moderately, or worse.
So are Health Care and Benefit Costs
The cost of health care and other employee benefits is another sticking point for our respondents. During the next 6 months nearly a third of them are planning for them to increase sharply, the highest percentage of responses in that category. Combined with those expecting their costs to increase only moderately, this represents a whopping 75 percent of those questioned.
Organizational-Level Financing and Taxes
Some 15 percent of our respondents anticipate their company’s availability of capital will decrease moderately, but more than 7 out of 10 report it will either stay the same or increase. Similarly, 8 of 10 think the cost of that capital will either remain the same or increase only moderately.
When the taxman cometh, nearly 9 out of 10 of our respondents think the bite will either stay the same or increase only moderately.
“Restructured state debt through tax increases has caused a fresh view-¦ .“
All in all, our survey participants are as positive on their own companies as they are on the economy as a whole, with two-thirds expecting that business will increase moderately or even sharply during the next six months.
Editors note: See related story U.S. IPO Market Predicted to Stay Strong for the Rest of 2011