U.S. Business Optimism Leaps in Q3 to Near-Record Levels

Optimism for the nation’s economic outlook among U.S. business leaders rose 20 percentage points in third quarter 2015 to a net balance of 74%, marking only the second time since 2004 it has eclipsed net 70%, according to data from the Grant Thornton International Business Report  http://www.grantthornton.global/insights/ (IBR), Chicago, Ill., USA. According to the survey of more than 2,500 business leaders in 36 economies, the U.S. is the fifth most optimistic economy overall. 

In third quarter 2015, business optimism dropped from net 58% to net 38% across the European Union, and from net 54% to net 33% in the Eurozone. Confidence in China, the world’s second-largest economy, decreased to net 26%, down 20 percentage points from the previous quarter. Globally, net 38% of businesses are optimistic, down from net 45% last quarter, with the most confident businesses in Ireland (net 90%), India (net 87%), the Philippines (net 86%), and Nigeria (net 76%). 

While confidence decreased globally, U.S. business leaders didn’t share the same sentiment. In third quarter 2015, the U.S. ranked as the fifth most optimistic economy, partially because of increased plans to invest in research and development (R&D) and all-time high export expectations. The percentage of U.S. companies planning to invest in R&D increased to net 36%, a 4 percentage-point increase from last quarter and a 9 percentage-point increase from one year ago. Additionally, U.S. export expectations increased to net 26%, marking the highest level in survey history and a 1percentage-point increase from the previous quarter.

 

"While China dominated the global business headlines, American business leaders may not have been fazed by the news, according to our study. Despite currency devaluation in China, confidence among U.S. business leaders continued to rise, and the spending in R&D and the growth in exports are evidence of that," said Mike McGuire, CEO of Grant Thornton LLP. "However, there’s some less-encouraging news in the fact that long-term investment decisions are still on hold. A majority of those surveyed are still hesitant—optimistic, but hesitant."

 

While optimism among U.S. business leaders has risen, sentiment about other areas of U.S. business performance and stability remains relatively unchanged. U.S. companies’ plans to invest in new buildings in the next 12 months remained stagnant at net 26% in third quarter 2015, while plans to invest in plants and machinery increased just 2 percentage points to net 22%. Revenue expectations among U.S. business leaders remained net 70% in third quarter, while profitability expectations decreased 9 percentage points to net 56%.

 

IBR data also reveals that U.S. hiring expectations remained relatively high at net 45%, down just 3 percentage points from last quarter, while U.S. pay raise expectations improved 7 percentage points to net 17% of U.S. business leaders expecting to offer employees an above-inflation pay raise in the next 12 months. A net balance of just 29% of U.S. business leaders cite economic uncertainty as a constraint on their ability to grow their operations in the next 12 months, up just 7 percentage points from the previous quarter, but a 6 percentage-point decrease from one year ago.

 

Founded in Chicago in 1924, Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, London, U.K., one of the world’s leading organizations of independent audit, tax, and advisory firms. In the U.S., Grant Thornton has revenue in excess of $1.4 billion and operates 57 offices with more than 500 partners and 6,400 employees. Grant Thornton works with a broad range of dynamic publicly and privately held companies, government agencies, financial institutions, and civic and religious organizations.

 

IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 2,580 businesses from all industry sectors across the globe conducted in August and September 2015. The target respondents are CEOs, managing directors, chairmen or other senior executives.