Tags: Economic | Confidence | Middle | Market | Companies

Economic Confidence Among Middle-Market Companies Soars to Record High

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By    |   Thursday, 27 April 2017 12:39 PM

Confidence in the U.S. economy among middle-market companies has reached a new high in early 2017, the National Center for the Middle Market at Ohio State University said.

With nine of 10 middle-market leaders indicating a positive perception of the country’s economy, this level of confidence represents the highest recorded in the Middle Market Indicator’s five-year history. 

The center obtained responses in early March from 1,000 CEOs, CFOs and other C-suite members of middle market firms, which are defined as companies with between $10 million and $1 billion in annual revenues. Executives were asked about revenue, employment, investment, confidence and productivity, among other topics.

This high level of confidence is bolstered by year-over-year revenue growth from nearly three-quarters of all middle market companies.

This contributes to a 9.2 percent year-over-year revenue growth rate for middle market companies, exceeding the five-year average of 6.6 percent and representing the highest rate ever recorded by the MMI.

Furthermore, six out of 10 middle market leaders believe their companies will experience an increase in revenue growth over the next 12 months.

Meanwhile, the increased confidence levels are not isolated just to the U.S. economy, with middle market companies’ confidence in their local economies reaching a record high at 88 percent.

The middle market’s confidence in the global economy continues its dramatic ascent to 77 percent, up from 65 percent the previous quarter and 51 percent during the first quarter of 2016.

“The middle market is continuing to benefit from and contribute to the boost in local, national and global economic confidence that followed the 2016 elections,” said NCMM Executive Director Thomas A. Stewart. “For this reason, we are likely to see increased domestic expansion and innovation, as well as sustained confidence, from many of these companies.”

Hiring is also on the rise among middle market businesses, with more than half adding to their employment rosters in the past year. The entire middle market has witnessed a 7.5 percent year-over-year employment growth rate, an increase from the previous quarter by more than two percentage points. This past year’s surge in merger and acquisition activity played a big part in this rise. Looking ahead, more than four out of 10 companies expect hiring increases over the next year.

“With impressive increases in revenue and employment growth, it’s unsurprising that 70 percent of middle market leaders have reported improvement in overall company performance in the last year,” said NCMM Managing Director Doug Farren. “As a result, we are going to see many companies expanding their services, launching new products and focusing on overall innovation.”

However, some economic storm clouds may be looming on the nation's financial horizon.

While President Donald Trump's team boasted Wednesday that its tax-cut plan would lighten Americans' financial burdens, ignite economic growth and vastly simplify tax filing, the proposal so far remains short of vital details, the Associated Press reported.

Such missing details include how it would be paid for. And based on the few specifics spelled out so far, most experts suggest that it would add little to growth while swelling the budget deficit and potentially handing large windfalls to wealthier taxpayers.

Trump's plan would replace the current seven income tax brackets with three, and the top bracket would drop from 39.6 percent to 35 percent. It would also slash the corporate rate from 35 percent all the way to 15 percent, a boon to most companies even though many don't pay the full tax now. With tax credits and other loopholes, most corporations pay closer to 20 percent, according to calculations by JPMorgan.

Perhaps the most contentious plank would enable taxpayers with business income — including those wealthy enough to pay the top tax rate — to instead pay the new 15 percent corporate rate. That's because Trump would apply the corporate rate to "pass through" businesses. Pass-throughs include partnerships such as law firms and hedge funds as well as most small businesses — from the local florist to the family-owned restaurant on Main Street.

What's more, some privately held large companies — including Trump's own real estate empire — are structured as pass-throughs and would benefit, too.

But one of the most respected economic gurus of our time is much more optimisitc.

Larry Kudlow, the veteran financial guru and former economist in the Reagan administration, said President Donald Trump’s proposed tax cuts will boost incentives for Americans to work, invest and save.

“The war against business is over,” Kudlow said in an interview from Washington with CNBC. “The biggest single missing ingredient in tax policy over the past 10 years, or even 15 years, is a competitive corporate tax code that produces business investment.”

Trump’s top economic adviser Gary Cohn and Treasury Secretary Steven Mnuchin on Wednesday revealed a plan to slash the federal income-tax rate to 15 percent for corporations, small businesses and partnerships. The plan calls for a one-time levy on about $2.6 trillion in U.S. company profits kept in foreign countries, where they avoid double taxation. Most foreign profits would be exempt from U.S. taxes, unlike the current system of taxing company income regardless of the location.
“These corporate tax cuts go directly to those points to make better rewards and incentives and make it easier to build a business for ten years,” said Kudlow, who helped to shape the Trump campaign’s economic plan.

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Confidence in the U.S. economy among middle market companies has reached a new high in early 2017, the National Center for the Middle Market at Ohio State University said.
Economic, Confidence, Middle, Market, Companies
Thursday, 27 April 2017 12:39 PM
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