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Middle market Q1 2017: The time to invest in the future is now

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Now may be the time for businesses to invest their extra dollars. Issued by the National Center for the Middle Market (NCMM), the Q1 Middle Market Indicator for 2017 showed continued confidence. Businesses have plans to invest in the future.

Confidence in the local, U.S. and global economy is driving more M&A activity.  In the past 12 months, 36% of large middle-market companies made an acquisition and 42% plan to make one in the year ahead. Companies that made an acquisition grew twice as fast as the rest of the middle market. Time will show whether that growth will translate into profitability.

Even though uncertainty still surrounds the future regulatory and tax environment, optimism did not wane in Q1 2017. Middle-market businesses are bullish: The political environment of the Trump administration has been perceived as friendly to business and confidence in its inherent benefits has been on the rise.

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In a high-growth environment, middle-market companies focus on innovation, new product development and entering new markets. They drive innovation through customer insights, advancing capital expenditure for new plants and equipment, and investing in new technology.

The NCMM barometer set a five-year record for revenue growth from the middle market in a single quarter; 9.2% for the first quarter of 2017.

Employment growth followed closely at 7.5%, a 1.9% hike from Q4 2016.

Overall U.S. growth in 2017 is poised to increase to over 2% from 1.6% in 2016. 
A look at the numbers Businesses have a great start for 2017. Confidence in the U.S. economy is at 90% and in the local economy at 88%. Confidence in the global economy is only 11% lower.

Uncertainty does not win the day The same challenges remain: political uncertainty, barriers to maintaining growth, and worries about cash, inventory management, or the ability to find and retain talent.

Nevertheless, when it comes to considering the future, middle-market companies appear to continue to choose bold moves, like investing instead of saving for cash reserves. Capital expenditure is the first place in which middle-market companies (34% of all middle-market firms and for 47% of the large middle-market ones) are most likely to invest.  

Conclusion Middle-market optimism appears to be at an all-time high. Businesses are taking calculated risks and making the most of current and future opportunities. Several measures prove that growth is backed by solid results and a realistic projection for the next 12 months. One thing is certain: The time to refer to the economy as “sluggish” is over.

Read the full Q1 2017 Middle Market Indicator report  from the National Center for the Middle Market.