Management Barometer is a quarterly survey of top executives of
large, U.S.-based multinational businesses.
133 CFOs and Managing Directors were interviewed about the third-quarter
business climate, through October 18, 2005.
NEW YORK , Nov. 15, 2005 (PRIMEZONE) -- Leaders of large U.S.-based businesses have turned less optimistic about the domestic and world economies. And 59 percent now see energy prices as a potential barrier to their company's growth, up sharply from 36 percent in the prior quarter. Executives from these energy-vulnerable companies are more uncertain about the domestic and world economies; have less healthy gross margins; and expect slower revenue growth, less new hiring and fewer key investments.
A less positive outlook:
-- Only 70 percent of senior executives say the U.S. economy is
currently growing, down from 82 percent in the prior quarter,
and 84 percent a year ago.
-- Just 50 percent are optimistic about the domestic economy's
prospects for the next 12 months, off from 62 percent in the
prior quarter and 77 percent a year ago. Only 44 percent of
executives from energy-vulnerable companies remain
optimistic, versus 60 percent of all others.
-- 68 percent say the world economy is growing,
essentially unchanged from 67 percent in the prior quarter
and 66 percent a year ago.
-- Just 54 percent are optimistic about the world economy's
prospects over the next 12 months, compared to 59 percent in
the prior quarter and 63 percent a year ago. Only 51 percent
of executives from energy-vulnerable companies remain
optimistic, versus 58 percent of all others.
"The number of companies seen as energy-vulnerable has increased dramatically over the past quarter," said John O'Connor, vice chairman of PricewaterhouseCoopers LLP. "And, across-the-board, the economic outlook is less positive -- with a connection to the higher cost of energy. The big question is: Are we witnessing a case of corporate jitters, or a shift in the tide?"
Running on Empty?
Pricier energy's impact may be seen in:
-- Squeezed margins. Among companies described by management as
energy-vulnerable, 36 percent reported improved gross margins
in the third quarter, but 32 percent said their margins
declined -- for a net of only 4 percent increasing. In
contrast, all other surveyed companies had a net of 17
percent with increasing margins.
-- Slower growth. Energy-vulnerable businesses are projecting
revenue growth averaging 7.1 percent over the next 12 months,
versus 10.1 percent for all others surveyed-a difference of
30 percent.
-- Fewer new jobs. Only 48 percent of energy-vulnerable
businesses plan net new hiring over the next 12 months,
versus 67 percent of all others. Workforce contraction
averaging 0.3 percent is expected for energy-vulnerable
companies, versus workforce growth of 2.5 percent for all
others.
-- Fewer key investments. Fewer energy-vulnerable businesses
expect to make increased investments over the next 12 months
for: information technology (42 percent, versus 64 percent
for all others); and new product or service introductions
(33 percent, versus 47 percent for all others).
"What was once a consistent, manageable cost has become increasingly problematic," said O'Connor. "If a period of stability can be achieved -- at whatever price-per-barrel -- businesses and their customers will be better able to assess the implications, and try to adjust."
PricewaterhouseCoopers' Management Barometer is developed and compiled with assistance from the opinion and economic research firm of BSI Global Research, Inc. Additional information is available from Pete Collins, survey director and publisher, at 646-471-4496, or pete.collins@us.pwc.com.
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