Middle Market Company Growth Slows as Companies Close Out 2018
New Q4 Report Reveals Strong Performance but Also Rising Uncertainty
COLUMBUS, Ohio, Jan. 23, 2019 /PRNewswire/ -- The optimism that spawned a long period of economic expansion in the middle market seems to have become more uncertain as revenue and employment growth rates reported a slowdown since last quarter with confidence also sliding downward, most notably in the services and financial services industries.
Data from the 4Q Middle Market Indicator (MMI) released today by the National Center for the Middle Market (NCMM) reveals that both revenue (8.6 percent to 7.9 percent) and employment growth (6.4 percent to 5.4 percent) rates have fallen since last quarter. Further, short-term expectations have diminished significantly (79 percent to 74 percent) and confidence in the national economy has slipped to 86 percent.
These numbers remain high by historical standards, however. And the share of middle market companies reporting improved year-over-year company performance has reached an all-time high at 73 percent. In fact, more middle market companies than ever before in the history of the MMI have reported overall revenue growth compared to one year ago and the outlook for 2019 also remains strong.
The long-term outlook for employment growth in 2019 is less rosy with forecasts falling significantly to 3.8 percent. Talent management issues is a top concern as looking for ways to acquire and retain the best people to move businesses forward remains a challenge in a full-employment economy. Further, cost concerns are rising, especially related to imports, exports and tariffs.
"Middle market companies have closed the books on a very satisfying 2018, but they face the new year with uncertainty and anxiety," said NCMM Executive Director Thomas A. Stewart. "Despite companies seeing warning signals, they are not at this point holding back on investment and, as of now, executives remain optimistic."
Throughout 2018, confidence in the U.S. economy has consistently stayed above 85 percent, currently at 86 percent for Q4. Local (89 percent) and global (73 percent) economic confidence showed more volatility with both currently coming in at their lowest levels in 2018. Despite these dips however, all three metrics remain well above the seven-year average recorded by the MMI.
The two key challenges still facing the middle market, which have been a trend all year, are talent and cost. The report found that talent concerns are near their all-time high, with 62 percent of middle market leaders expressing worry about retaining the best people to meet the current demands of their business., Costs are also weighing heavily on leaders' minds. Middle market leaders are less concerned with governmental issues, rules, and regulations apart from healthcare and tariffs.
"As middle market companies settle in to 2019, they need to prepare themselves for the unexpected and develop their top talent accordingly since retention has been a major challenge this past year," said NCMM Managing Director Doug Farren. "Additionally, middle market executives need to strengthen their agility to adapt with the current business climate."
For additional survey data and infographics, including in-depth looks at regional variations, hiring/talent acquisition efforts and other business concerns among middle market companies, visit http://www.middlemarketcenter.org.
About the Middle Market Indicator (MMI)
The MMI, which was created in 2012, surveys 1,000 executives (CEOs, CFOs and other financial decision makers) from the middle market each quarter to examine topics related to business capabilities, performance, growth drivers and economic outlook among other topics. This quarter's MMI was fielded during the first two weeks of June 2018. It is weighted to accurately reflect the size, industry-wide and geographic distribution of this sector, which includes companies ranging from $10 million to $1 billion in annual revenue. The survey is conducted by RTi Research on behalf of the National Center for the Middle Market.
About the National Center for the Middle Market (NCMM)
The National Center for the Middle Market is a collaboration between The Ohio State University's Fisher College of Business, Chubb Limited, Cisco Systems, Inc., and Grant Thornton LLP. It exists for a single purpose: to ensure that the vitality and robustness of Middle Market companies are fully realized as fundamental to our nation's economic outlook and prosperity. The Center is the leading source of knowledge, leadership, and innovative research on the middle market economy, providing critical data analysis, insights, and perspectives for companies, policymakers, and other key stakeholders, to help accelerate growth, increase competitiveness and create jobs in this sector.
Housed at The Ohio State University's Fisher College of Business, the National Center for the Middle Market is the first center of its kind in the nation. The Center enthusiastically serves middle market firms, students, academic researchers, policy makers, the media and other key stakeholders with interests in the health and well-being of the middle market. The Center is fully committed to funding and distributing the most credible open-sourced research, dynamically creating new knowledge, providing programs that drive value for middle market companies, and offering a well-informed outlook on the health and future of the middle market via the Middle Market Indicator.
SOURCE National Center for the Middle Market
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