Alerts
Alerts
January 31, 2013

Confidence in business conditions remains lukewarm

Pessimism about Congress intensifies

Do you expect U.S. business conditions to improve this year? Based on our 2013 Business Outlook Survey, 54 percent of business owners and executives expect improvements in U.S. business conditions, compared to 68 percent in 2012 and 82 percent two years ago. There is just slightly greater optimism about the business conditions at their own companies. Sixty-two percent expect business conditions in their own organizations to improve, compared to 70 percent in 2012 and 75 percent in 2011.

Not surprisingly, there isn’t much confidence in Congress. For example, only 20 percent of the 550 respondents are cautiously optimistic about business conditions since Congress passed legislation to avoid the fiscal cliff. As one respondent noted, “Congress has not made good decisions for quite some time now, and the teetering on the fiscal cliff was a prime example.” Furthermore, 62 percent are pessimistic about whether Congress will raise the debt ceiling and make meaningful spending cuts this year. One of the business executives explains his pessimism with these comments: “Congress must cut expenses. Period. But I seriously doubt they have the guts to execute it. Failure to do so puts the country and our businesses at risk…”

The 11-question survey was conducted with clients and friends of the firm from January 7 to 29, 2013. Many of the survey participants are located in the states of Ohio, Illinois, Michigan, and Florida – the states where McDonald Hopkins has offices.

This year, 47 percent ranked health care costs among the three greatest challenges facing their companies, compared to 39 percent two years ago. The federal budget deficit and high tax rates are also growing areas of concern.

Greatest Challenges Facing Their Companies

    2013   2012   2011 
Increasing health care costs     47%   43%   39%   
Retaining profit margins     41%   40%   42%
Federal, state and local regulations    35%   39%   36%
Stiff competition    35%   35%    41%
Federal budget deficit    32%    24%     19% 
High tax rates    27%   17%   17%
Employee issues     15%   15%   20%
Declining demand for our products/services    15%   16%   13% 
Access to credit   13%   16%   17% 
Inflation concerns     10%   11%   14%
Energy costs      4%     6%     8%

Are companies likely to increase their number of employees in 2013?

Forty-two percent of the respondents say their organization is likely to increase its number of employees in 2013, compared to 50 percent in the past two years. Another 46 percent anticipate employee numbers will stay the same and 12 percent foresee a decrease in personnel.

Other insights

Is your business planning to invest in capital in 2013?

Although 40 percent expect to make a moderate investment in capital, 37 percent do not plan to invest in capital in 2013. One explanation given: “Tax increases and the very uncertain economic environment will limit our capital spending on potential growth opportunities.”

How do you expect health care reform to affect your company’s employee health care plan in 2014?

According to 42 percent of the respondents, their companies are still evaluating the options for 2014 based on health care cost increases this year. However, 38 percent already plan to offer employees essentially the same health care plan, but they may increase the cost to employees. And 13 percent will either offer redesigned plans to reduce company costs, modify employee work schedules to reduce the number of full-time personnel, or will end their employer-sponsored plan and let employees go to exchanges, which means the employer will pay penalties. "[The] Health care bill is a major disappointment,” said one of the survey participants. “I don’t see anything that will help us contain costs, except discontinuing our plan and increasing our employees’ pay enough to send them to purchase their own insurance…”

Are your plans to dedicate more resources to international growth or more to domestic growth?

The focus is to dedicate more resources to domestic growth in 2013, according to more than 50 percent of the survey respondents. Only eight percent will dedicate more resources to international growth and 12 percent will dedicate more to both.

Frustration is rampant

"Companies will be afraid to invest due to Washington’s in-fighting.”

Frustration with overall business conditions is on the rise. Last year, only eight percent of the survey participants expected U.S. business conditions to decline. This year, 20 percent predict that U.S. business conditions will decline. The business owners and executives who answered the questions in the McDonald Hopkins Business Outlook Survey voiced their strong concerns with numerous comments like these:

  • “Believe that economy will sputter along in 2013 as it did in 2012. Too much government uncertainty and interference.”
  • “I do not have much faith in our national government leaders. They make it more and more difficult to grow a business and be profitable…”
  •  “…we will continue to keep kicking our problems down the road until it is too late and we will all be in serious trouble…”
  • “It is becoming more difficult to be a small business. Costs and taxes are increasing to an alarming degree. Owning this business used to be fun. That is not the case anymore.”
  • “The economic future of the United States is still very uncertain, since our government cannot seem to take the steps necessary to balance the budget…”
  • “The present administration in Washington is not pro-business.”

On a more positive note, one of the business executives said, “I think American business and consumers will find a way.”

To read the full report, click here.

If you have questions about our 2013 Business Outlook Survey, please contact:

Carl J. Grassi

President

216.348.5448

cgrassi@mcdonaldhopkins.com

 

Carl J. Grassi, President
600 Superior Avenue, East, Suite 2100, Cleveland, Ohio 44114
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