Small Businesses getting help in down economy

U.S. Business Leaders Show Declining Optimism about Economy

U.S. business leaders continue to show a lack of optimism about the performance of the nation’s economy, according to the latest data from the Grant Thornton International Business Report, a survey of 3,200 business leaders in 44 countries. In fourth quarter 2012, optimism among US business leaders fell to -4 percent, the lowest since the depths of the financial crisis.

This finding accompanies a general lack of optimism about most areas of business performance and stability. For example, the net percent balance of US business leaders expecting revenues to increase in 2013 decreased by 10 percentage points from the third quarter. In addition, profitability expectations dropped by nine percentage point from the third quarter. As far as employment, arguably the country’s biggest concern, only a net balance of 25 percent of business leaders in the United States foresee an increase in hiring during the coming year, a three percentage point decrease from the previous quarter.

“The lack of confidence in, and optimism about, our economy among the nation’s business leaders shouldn’t be a surprise to anyone, given the ongoing fragile recovery and recent drama surrounding the fiscal cliff,” said Stephen Chipman, chief executive officer of Grant Thornton LLP. “During the next few months, our country’s political leaders should focus on resolving uncertainty so that business leaders, in this country and beyond, can gain the confidence in our economy that is crucial to US business competitiveness and the dynamic growth that comes with it.”

The notion that the recent debate about the fiscal cliff is affecting optimism about the economy correlates with other recent research from Grant Thornton US, which suggests 40 percent of CFOs have delayed decision making because of similar concerns.1

And though 39 percent of respondents believe there will be increased access to financing in the next 12 months, which often helps grow a business, 48 percent don’t expect to see any change. Slightly encouraging is that 74 percent of business owners plan to give employees raises in the next 12 months, though only 12 percent plan to give raises above the rate of inflation.

Interestingly, the lack of optimism in the US economy is actually quite different than what is occurring in other global markets. For example, business optimism in the emerging markets of Latin America remained relatively stable in the past year, and actually increased to 69 percent in the fourth quarter, up from 61 percent during the same period last year. The BRIC economies (34 percent to 39 percent) also remained consistently optimistic, and there has also been an increase in Asia Pacific (excl. Japan) (23 percent to 28 percent) during the same period.

By comparison, optimism in North America has been on a bit of a rollercoaster during the past year—going from 6 percent in the fourth quarter 2011 to 52 percent in the second quarter 2012, before falling to just 1 percent in the fourth quarter 2012. The G7 economies have seen similar fluctuations, while European businesses have reported a slow decline in business optimism.

“With such lack of optimism in our economy, many business owners may decide to postpone any major investments related to the future of their business, but this could be a mistake,” said Chipman. “In a market such as this, there are opportunities for certain businesses that have the foresight to concentrate on long-term growth opportunities by investing in the right people and infrastructure. Those businesses will be best positioned for success once sustained economic recovery is finally a reality.”