US Economy a Look at the Middle Market

US Economy a Look at the Middle Market

U.S. middle market companies recorded 7.2 percent average revenue growth in the second quarter of 2016, building upon already strong growth figures from Q1, according to the National Center for the Middle Market (NCMM). Combined with solid jobs gains through the same period, this finding headlines the Q2 2016 Middle Market Indicator (MMI), released today by the NCMM.

“Middle market growth accelerated in the first half of 2016 compared to last year—a robust demonstration of continued gains even after seven full years of expansion” said NCMM Executive Director Thomas A. Stewart. “This quarter, we observed great improvement across the board, with all but one industry group reporting performance gains from the quarter before.”

Middle Market Keeps Growing and Growing
The middle market continued to post strong growth rates, with average revenues rising 7.2 percent in the past year. This outpaces Q1 2016’s average growth rate of 6.3 percent, as well as the historical average growth of 6.4 percent (dating back to 2012). Large middle market companies – those with $100 million to $1 billion in annual revenues – posted even stronger gains, with an average revenue growth of 8.5 percent in the last twelve months.

Average workforce growth was at 4.4 percent, up substantially from 3.6 percent the previous quarter. Thirty-nine percent of firms increased the size of their workforce over the last 12 months.

“The middle market’s net new job growth is consistently one-and-a-half to two times greater than that of big business or small business, said Stewart. “It’s not surprising that recruiting talent consistently ranks among executive’s top challenges—they need a lot of it.”

Regulatory Burden Is High, but Manageable
Nearly half (47 percent) noted that federal regulations cause a major impact on their business; yet only 13 percent of middle market firms overall stated that their regulatory burden is unmanageably high. Sixty percent of firms feel that federal regulations have the greatest impact on their business, with 23 and 17 percent, respectively, indicating that state and local regulations impact their businesses the most.

Overlapping regulatory regimes cause problems for the middle market. Nearly three-quarters (72 percent) of companies feel the compounding effects of regulations — different levels of government independently addressing similar issues — to some degree.

“Middle market companies are big enough to operate in many jurisdictions, but often lack the scale to cope successfully with the complexities of complying with multiple local, state and federal regulations,” said Stewart.

Retail Posts Strong Performance
The retail trade industry posted strong signs across financial and hiring performance. Eighty-one percent of retail trade executives reported improved performance year-over-year, the largest percentage of any industry surveyed and an 11 percent increase from Q1 (70 percent).

Mean total employment growth within the industry was up 4.9 percent, outpacing the broader middle market at 4.4 percent. Just six percent of firms reported a decrease in the size of their workforce in the past year. Looking ahead, 97 percent of retail trade firms expect consistent or improving revenues in the next 12 months, with half (51 percent) projecting a rise in revenue growth.

Retail trade outpaced the wholesale trade industry in most metrics, but both sectors predict growth in the year ahead. Fifty-eight percent of wholesale trade executives foresee increased revenues in the next 12 months, compared to 51 percent of those in retail trade. Hiring outlooks are similar as well, with about one-third of companies in each industry planning to increase their workforce in the next twelve months.

Construction Paving the Way
The construction industry observed large growth during Q2. Seventy percent of firms indicated that they had improved year-over-year performance in Q2, compared to 50 percent in Q1. In the same window, revenue growth jumped from 4.7 percent to 7.1 percent. Moreover, mean total employment growth grew from 2.4 percent to 6.1 percent between Q1 and Q2.

“Construction is playing a larger role this quarter when compared to last year, and this improvement can’t just be chalked up to good weather” said Stewart. “The construction industry is booming in the middle market and we’re excited to see how this plays out in upcoming months.”

Brexit Has Potential to Influence Business Investments
A recent NCMM report, “Brexit and the Middle Market,” revealed that 28 percent of firms predict decreases in U.K. business investments in the wake of the Brexit vote, with a similar number (26 percent) anticipating an increase in U.S. business investments.

About the U.S. Middle Market
A major driving force in the United States economy, the middle market delivers above its own expectations year over year. Middle market companies – those with annual revenues between $10 million and $1 billion – provide roughly one third of the United States’ total employment and GDP. As an individual market segment, it is comparable to the economies of Germany and Japan.

About the Middle Market Indicator (MMI)
The MMI surveys 1,002 executives (CEOs, CFOs and other members of the C-Suite) from the middle market each quarter to examine topics related to business capabilities and performance, growth drivers and economic outlook among other topics. This quarter’s MMI was fielded June 9 to June 19, 2016. 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.

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 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, SunTrust Banks, 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.

The following two tabs change content below.
Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.

You must be logged in to post comments :  
CONNECT WITH