Chief executives are optimistic about the economy's prospects for the first time since the second quarter of 2007.
PricewaterhouseCoopers' Private Company Trendsetter Barometer, a survey of CEOs of the nation's leading private companies, found that 51% were optimistic about the economic outlook for the next year, up 6 points from the previous quarter and up 32 points from the same quarter in 2009.
The number of CEOs who expressed pessimism fell 4 points from the previous quarter, to 11%, a 30-point drop from the same quarter a year earlier.
Fifty-three percent of CEOs at private companies with international operations were optimistic, compared with 49% of those at private companies with domestic-only operations.
The executives' revenue growth projections for the next 12 months increased 1.5 points from the previous quarter's 8.5%.
Seventy-seven percent of leading private businesses are planning for positive revenue growth over the next year — 38% expect double-digit growth and 39% expect single-digit growth, PricewaterhouseCoopers said.
Only 5% of the chief executives projected negative growth, down 6 points from the previous quarter.
Seventeen percent of the chief executives said they expect zero growth.
"As we've moved beyond the last few quarters, private business owners are more confident that the U.S. and global economies have hit rock bottom and are beginning to recover," Ken Esch, a partner with PricewaterhouseCoopers' Private Company Services practice, said in a press release last week.
"Consequently, we're now seeing more companies projecting growth," Esch said. "It's important to note, however, that these projections are still almost half of what private company CEOs were projecting in midyear 2007."
For the first time since the second quarter of 2008, 53% of executives surveyed plan to add staff to their work force over the next 12 months, up from 47% in the prior quarter and up from 31% in the first quarter of 2009.
At the same time, just 4% of respondents are planning to reduce staff over the next 12 months, down 4 points from the previous quarter and 6 points from the same period in 2009.
"It's encouraging to see that private companies are backing up their expectations for growth by investing in their work force," Esch said.
"The smaller companies in our sample are planning to hire relatively more employees than the larger companies," Esch continued, adding, "This could be the beginning of an upward trend in the labor markets."
Concern about lack of demand remains a potential barrier to growth, with 74% of respondents citing it as a worry.
Other top concerns include legislative/regulatory pressures (48%), increased taxation (45%), profitability/decreasing margins (40%) and lack of capital for investment (25%).
Part of the challenge in the first quarter was a lack of bank loans. Only 4% of the chief executives reported that they had loans, off 1 point from the prior quarter and 6 points from a year earlier.
More small businesses — those with revenue under $100 million — completed bank loans (5%) in the first quarter than large businesses (2%).
"While there may be evidence that the credit markets are becoming more active, and quality borrowers are gaining access to capital at increasingly more favorable terms, the data so far doesn't reflect new loans," Esch said.
