First Middle Market Indicator gives data, analysis on sector
The National Center for the Middle Market (NCMM) today announced that the middle market, a leading indicator of America's future competitiveness, grew at a rate of 8.4% in the past year, but expects future revenue growth will slow according to findings unveiled today in the first Middle Market Indicator (MMI), a look at the health and outlook of middle market companies in the United States. The NCMM is a partnership between The Ohio State University Fisher College of Business and GE Capital.
The survey, conducted in March, found more than 70% of companies reported increased gross revenue in the first quarter of 2012 compared to the first quarter of 2011. Fewer than two in ten, or 16%, of companies said that revenue had deteriorated.
Despite these strong results, middle market businesses expect revenue growth will slow to 7% over the next twelve months. Although middle market companies are cautiously optimistic, they are still outpacing projections from large S&P businesses, which expect gains of just 4.7% over the same period.
"Given that middle market companies have been an engine of growth and a significant source of jobs during the recent economic recovery, we expect these growth and hiring projections will have a pronounced impact on U.S. hiring overall," said Dr. Anil Makhija, academic director of the National Center for the Middle Market. "This research is imperative to identifying the drivers and barriers of middle market growth, so we can continue to support their contributions to the economy."
Middle market continues to add jobs
The NCMM's first piece of research, conducted in October 2011 and the largest study of the U.S. Middle Market ever, revealed that while big businesses shed 3.7 million jobs during the recession, the middle market added 2.2 million jobs. This trend has continued, as the Middle Market Indicator found that middle market companies are adding more jobs to the U.S. economy. Findings show 2.3% net job growth among middle market companies, versus 1.7% net job growth for S&P 500 companies and 1.9% for small businesses. Over the past year, middle market firms have added more than 940,000 jobs versus just 630,000 jobs added by the S&P 500.
Confidence increases as middle market firms look closer to home
Only 15% of middle market businesses are confident in the U.S. economy's prospects, and only 7%, or one out of 15, are confident in the global economy. Closer to home, however, confidence is much stronger, with 28% of respondents expressing confidence in their local economy.
Headwinds slowing projected growth rates
Executives surveyed cited policy and regulations as the most significant barriers to growth with four main challenges standing out as highly or somewhat challenging:
Cost of healthcare (92%)
Ability to maintain margins (86%)
Uncertainty about government regulation (81%)
Ensuring compliance with regulation (69%)
Cost of healthcare was cited by an overwhelming majority of respondents (92%) as a challenge, in particular for smaller middle market companies and those companies in the construction and wholesale trade industries.
"It is clear in our findings that middle market executives feel the things that are out of their control are the biggest obstacles to future growth," said Dr. Makhija. "Given the importance of the middle market to the health of the overall economy, legislators should take notice of these concerns and perhaps consider steps that would foster improved conditions for growth and, subsequently, hiring."
More executives saving an extra dollar
Middle market business leaders clearly reiterated their moderate outlook when asked how they would allocate an extra $1, with 41% saying they would save it due to the current economic climate, uncertainty about the future, and the importance of having liquid assets.
Results by industry
Rising commodity costs and protecting margins
Uncertainty about how government actions will impact business
Ensuring compliance with looming regulation and the uncertainty of government actions
Ability of senior management to lead effectively
Ability to maintain margins
Why the middle matters
The middle market is an engine of growth comprised of about 195,000 U.S. businesses with revenue between $10 million and $1 billion. It accounts for a third of the nation's GDP and more than 41 million jobs, or 36% of U.S. private sector employment in 2010. If the middle market were a country, it would rank as the fourth-largest economy in the world, behind Japan and ahead of Germany.
The middle market has demonstrated resilience during the recent economic crisis with 82% of middle market companies surviving the recession compared with 57% of small businesses. Not only have middle market companies by and large escaped the recession, they have also continued to grow: 27% of all large companies in 2010 were still middle market firms in 2005.
The MMI is a quarterly indicator that will be published on the third Wednesday of the month following the quarter. With no analysis previously available, the NCMM launched the MMI to provide insights and analysis on this critical component of the US economy. Findings of the NCMM's first piece of research, "The Market that Moves America," were announced at the Leading from the Middle conference, a summit for middle market decision makers held in October 2011 at The Ohio State University. Third quarter findings of the MMI will be unveiled at the second annual conference taking place on October 24, 2012, again at The Ohio State University.
Note to editors: Dr. Anil Makhija is available for additional insights and interviews upon request.
The MMI surveys 1,000 CEOs, CFOs, and other C-suite executives of America's middle market companies on their businesses, their capabilities and performance, their growth drivers and their overall economic outlook. The survey was designed to accurately reflect the 195,000 U.S. firms with revenues between $10MM and $1B, the upper and lower limits of middle market annual revenue.
The quarterly survey is conducted by an independent research firm, RTi, on behalf of the National Center for the Middle Market.
2.3% net job growth among middle market companies, versus 1.7% net job growth for S&P 500 companies and 1.9% for small businesses. Over the past year, middle market firms have added more than 940,000 jobs versus just 630,000 jobs added by the S&P 500.
About the Middle Market Indicator
The Middle Market Indicator (MMI) is a quarterly survey of 1,000 CEOs, CFOs and other C-level executives from a geographically balanced sample of leading middle market companies in the United States. The survey examines the health and outlook of middle market businesses by analyzing capabilities, performance, growth drivers and overall economic outlook. The survey is conducted by independent research firm RTi on behalf of the National Center for the Middle Market located at The Ohio State University Fisher College of Business. More survey information can be found at middlemarketcenter.org/research.
About the National Center for the Middle Market
Founded in 2011 in partnership with GE Capital, and located at The Ohio State University Fisher College of Business, the National Center for the Middle Market is the leading source of knowledge, leadership and innovative research on the U.S. middle market economy. Through research, corporate outreach activities and student engagement, the NCMM is dedicated to promoting job creation and growth in the middle market as well as driving the dialogue on this vital economic segment. For more information, please visit middlemarketcenter.org.