Middle Market Confidence in U.S. Economy Reaches Record High in Q1 2017
Friday, April 28th, 2017
Confidence in the U.S. economy among middle market companies has reached a new high in early 2017, according to the Q1 2017 Middle Market Indicator released by the National Center for the Middle Market. With nine in 10 middle market leaders indicating a positive perception of the country's economy, this level of confidence represents the highest recorded in the MMI's five-year history.
The increased confidence levels are not isolated just to the U.S. economy, with middle market companies' confidence in their local economies reaching a record high at 88 percent. The middle market's confidence in the global economy continues its dramatic ascent to 77 percent, up from 65 percent the previous quarter and 51 percent during the first quarter of 2016.
"The middle market is continuing to benefit from and contribute to the boost in local, national and global economic confidence that followed the 2016 elections," said NCMM Executive Director Thomas A. Stewart. "For this reason, we are likely to see increased domestic expansion and innovation, as well as sustained confidence, from many of these companies."
This high level of confidence is bolstered by year-over-year revenue growth from nearly three-quarters of all middle market companies. This contributes to a 9.2 percent year-over-year revenue growth rate for middle market companies, exceeding the five-year average of 6.6 percent and representing the highest rate ever recorded by the MMI. Furthermore, six out of 10 middle market leaders believe their companies will experience an increase in revenue growth over the next 12 months.
Hiring is also on the rise among middle market businesses, with more than half adding to their employment rosters in the past year. The entire middle market has witnessed a 7.5 percent year-over-year employment growth rate, an increase from the previous quarter by more than two percentage points. This past year's surge in merger and acquisition activity played a big part in this rise. Looking ahead, more than four out of 10 companies expect hiring increases over the next year.
"With impressive increases in revenue and employment growth, it's unsurprising that 70 percent of middle market leaders have reported improvement in overall company performance in the last year," said NCMM Managing Director Doug Farren. "As a result, we are going to see many companies expanding their services, launching new products and focusing on overall innovation."
Construction companies represent the clear industry standout throughout all major measurement indices of the MMI. Specifically, the middle market construction industry experienced a 20.5 percent year-over-year revenue growth rate in Q1 2017, nearly doubling its revenue growth rate from the previous quarter. The industry featured an employment growth rate of 16.6 percent, with about half of these companies expanding into new domestic markets, mainly due to mergers and acquisitions.
Challenges for the Middle Market
While middle market leaders anticipate growth in the coming year, the MMI has helped to identify a number of key challenges. Leaders are concerned about the changing nature of the marketplace, the impact of politics on regulations and trade and figuring out how to control health care costs. Chief among the internal challenges are figuring out how to efficiently maintain growth, including cash and inventory management, and finding and retaining qualified workers.