By J.D. Booth
March 7, 2013
As far as Corp! magazine readers are concerned, the upcoming 12 months aren’t likely to be bringing classic author Charles Dickens and his “Great Expectations” to mind.
Indeed, the third annual survey of its kind sponsored by Corp! and conducted by Michigan-based Business Research Group and The Business Improvement Team, shows a modern-day version of Dickens’ work might just as well be titled “Moderate Expectations.”
Already having factored in last fall’s election cycle (including the return of President Obama to a second term), this year’s online survey was conducted between Nov. 29, 2012, and Jan. 30, 2013.
Of those who completed the survey, 56 percent self-identified as owners, CEOs, partners or principals of the company they represent. Another 9 percent said their title was chair, chair or a member of the board of directors.
This year’s survey is in many respects similar to last year’s, where respondents viewed the economy as continuing to improve, although movement in outlook for key areas 12 months later is evident.
As far as the expectations for the state’s economy, the biggest changes year over year can be seen in those who either believe the economic outlook will increase sharply (11 percent compared with just 4 percent a year ago) or experience a moderate decrease (12 percent expect that this year compared with 4 percent a year ago).
A key area is that of job creation from small companies. Just 49 percent of respondents expect job creation to either sharply rise (11 percent) or increase moderately (38 percent), a decline from last year’s 5 percent and 62 percent for a total of 67 percent.
Expectations for job creation from medium to large companies also slipped from a year ago when 55 percent of respondents said they expected job creation to either increase sharply (3 percent) or moderately (52 percent). While those expecting sharp growth was up (9 percent), only 41 percent expect moderate growth, resulting in an overall growth expectation in the medium or large sized group that slipped 5 percent year over year.-¨ For an economy that continues to “tread water,” a lack of confidence among those expected to break through to a more robust economy may be troublesome.
Those who own and run business know all too well the key factors that drive profitability and growth; among them taxes, availability of capital and the cost of production.
Add in those who believe production costs will sharply rise with those expecting moderate increases and the total remains unchanged from a year ago: 61 percent.
But more than double the number of respondents who expected last year their production costs would rise sharply (7 percent) now believe that will occur in 2013 (15 percent), with 46 percent saying this year they expect moderate increases compared with the 54 percent who said that in last year’s survey.
The Corp! survey included questions related to the perceived outlook for the next six months in individual industries.
It’s when comparing those results year over year that the differences in respondents’ expectations begin to vary significantly.
For example, a total of 29 percent of respondents expect to see a sharp or moderate increase in agriculture, forestry and commercial fishing compared with the 20 percent a year ago. But 24 percent of respondents believe things will get worse (16 saying moderately, 8 percent sharply) which is more than the 19 percent expressing pessimism in those sectors a year ago.
In the construction industry (both residential and commercial), respondents were generally positive about what the next six months will bring, especially compared with a year previous, with a significant swing of 19 percent between those who last year believed there would be a moderate increase in activity and this year.
Also notable is a drop in the percentage of respondents who believe the construction industry would “stay the same”-52 percent a year ago compared with just 25 percent in this year’s survey.
In the manufacturing sector, expectations for increases beyond what has already occurred seemed to be muted.
A year ago, 3 percent of respondents said they expected a sharp increase in activity and 56 percent believed there would be a moderate increase in the sector. This year, those figures were 8 percent and 41 percent respectively, possibly a result of relatively strong performance that some see as not quite a trend.
In the wholesale and retail trade sector, respondents were also somewhat “iffy” about the short-term future.
On a positive note, there was a marked jump (2 percent in 2012; 10 percent in 2013) in the percentage of respondents who expect to see a sharp increase in activity. But fewer people (40 percent this year compared with 53 percent in 2012) expect to see a moderate increase in the sector and those predicting the status quo also dropped-from 39 percent in 2012 to 29 percent in this year’s survey.
Respondents of this year’s survey were almost exactly evenly divided when it comes to predictions for the finance, banking and insurance sector.
Only about 1 percent last year expected sharp increases in activity in the sector, followed by 35 percent who predicted moderate increases last year.
A year later, the “increase sharply” view had risen to 19 percent, with an identical 19 percent expecting moderate increases and the same percentage logged for “stay the same.”
However, while only 8 percent of respondents last year expected to see a moderate decrease (an additional 1 percent predicting a sharp decrease), this year’s survey revealed 19 percent of respondents expecting moderate decreases in the finance, banking and insurance sector and another 19 percent anticipating a sharp decrease.
Another bellwether sector-real estate, rental and leasing- demonstrated at least modest improvements in outlook over last year’s survey results, with those expecting a sharp increase in outlook going from 2 percent in 2012 to 10 percent this year.
At the same time, the percentage of survey respondents expecting a moderate increase in activity went up as well, from 42 percent in 2012 to 49 percent in the latest survey. Even among those who expect a moderate decrease in activity, there was little change year over year (16 percent versus 19 percent this year), further indication that the sector is at least trending in a positive direction.
Professional, scientific and technical services is another sector where positive change is expected, with 11 percent saying there will be sharp increases in activity compared with 9 percent of respondents giving that prognosis in 2012. While some might see the movement trending in the wrong direction given the percentage of survey respondents expecting moderate increases (58 percent in 2012 compared with 48 percent this year), an argument could be made for optimism given expectations in other sectors.
Travel/tourism/dining could be said to fall in one of those borderline sectors when it comes to perceived outlook. While fewer said the outlook remains the same compared with a year ago (25 percent this year compared with 31 percent in 2012), a greater percentage this year are in the “sharply decrease” slot (5 percent versus 1 percent in 2012).
Fewer respondents this year expect enrollment in the post-secondary sector, which would include university, community college, retraining and advanced degrees, to go up sharply (2 percent this year compared with 6 percent in the previous survey) or even moderately (29 percent this year compared with 35 percent a year ago).
Your own organization
When asked to drill down to their own organization, the expectation for salaries year over year was nearly flat-with a marginal number (7 percent this year compared with 6 percent last year) expecting sharp increases in total salary and 41 percent (compared with 46 percent last year) predicting moderate increases in total salary.
Innovation was another area where most respondents-whether predicting sharp increases, moderate increases, or status quo-expect little if any change year over year.
Survey respondents did say their organization is likely to do marginally more outsourcing than a year ago (5 percent compared with 4 percent a year ago said there would be a sharp increase in outsourcing; 20 percent compared with 15 percent a year ago expecting moderate increases).
Overall, respondents expect people will be working fewer hours in 2013 compared with 2012, with 38 percent predicting a moderate increase in hours worked (53 percent saying the same a year ago). At the other end of the scale, 8 percent said there would be sharp decreases in hours worked compared with just 2 percent making that prediction a year earlier.
And new business? Survey respondents aren’t as optimistic as some might hope; the percentage of people suggesting moderate increases in new orders was down to 39 percent compared with 57 percent in 2012. At the same time, those expecting moderate decreases in new orders increased to 13 percent from 1 percent in 2012.
The cost of production for companies represented by those who responded to the survey is expected to be relatively flat compared with a year earlier (5 percent expect sharp increases compared with 4 percent in 2012; 41 percent foresee moderate increases compared with 47 percent a year earlier and a nearly identical 38 percent-39 percent in 2012-see no difference).
But health care is quite another story.
A significant 38 percent of respondents expect costs for keeping employees healthy to jump sharply (just 24 percent made that prediction a year ago) while those anticipating moderate increases fell to 41 percent from 56 percent in 2012.
When it comes to availability of capital for their business, more respondents (18 percent this year compared with 8 percent last year) said they expect the availability of capital to decrease moderately and fewer believe it will stay the same (31 percent versus 53 percent in 2012).
It will also cost more to borrow-10 percent saying the costs of borrowing would increase sharply compared with just 3 percent making that prediction a year ago. And even moderate increases are expected by more respondents this year (39 percent compared with 26 percent a year ago).
They’ll also pay more taxes, according to predictions by most respondents (a combined 68 percent said moderate or sharp increases were expected compared with 46 percent a year ago).
Expectations remain muted
Perhaps more troubling than any one indicator is the percentage of respondents to this year’s survey that see either sharp or moderate increases in overall expectations for their company. Last year, a combined 72 percent expected their economic standing to be better (either sharply or moderately) in six months. Today, that combined number is just 63 percent.
For at least some, the bigger picture remains one where consumer confidence is the central focus.
That said, January’s index (as published by The Conference Board) is on a downward trend at 58.60 (66.70 in December 2012) but a long way from the record low of 25.30 posted in February 2009.
Is it something of a self-fulfilling prophecy?
Macroeconomics aside, respondents to Corp! magazine’s survey are making one thing clear: they pay attention to the details of running a business.
(Editor’s Note: Congratulations to two survey participants whose names were randomly drawn to win a gift card, which was offered as an incentive to participate in the survey. They are: Cheryl A. Bida and Nick Phillips.)