Economic Outlook

Anticipated Performance

POTENTIAL SIGNS OF SOFTENING

While the vast majority of firms expect either stability or improvement in the U.S. economy in 2019, the percentage expecting further gains has fallen markedly (46% vs. 55%) compared to last year.

Although not at recessionary levels, the drop in optimism is similar to what occurred before the last recession. Most firms expect improvement in their company’s overall financial performance this year, and nearly all firms anticipate either economic improvement or stability, similar to post-recession levels. However, a trend of declining optimism is emerging across indicators.

Expectations for improvement in the U.S. real estate market fall lower compared to last year (37% vs. 45%), and nearly one in five firms project the market will worsen. Interest rates have been on the rise and, after roughly seven years of recovery from the impacts of the Great Recession, housing costs are notably higher. While nearly half of firms expect stability during 2019 and more than a third expect growth, the scale is tipping from optimism to recognition of a potentially challenging environment.

Global expectations shifted from growth to stability, as well. The percentage of firms expecting improvement in both emerging and developed global market economies fell by 13% (43% vs. 56%, emerging; 39% vs. 52%, developed). In comparison to 2018, the picture is a plateauing global market rather than a growth engine.

Across company size, nearly two thirds of firms anticipate better performances in 2019; around half expect stability in both developed and emerging global-market economies.
Roughly half of firms across size expect further improvement in the U.S. economy. Nearly half of mid-size and large firms expect improvement within emerging global markets, and around four in ten across size expect further improvement in developed global markets.
Expectations for the U.S. real estate market are mixed: close to half of small firms expect improvement, while expectations among mid-size and large firms tilt towards stability rather than further gains. Essentially one in five firms across size expect the market to worsen.

When asked about expectations for 2019 economic performance by trade bloc, projections are mixed:

U.S./CANADA/MEXICO

80% predict stability or improvement, and one in five predict worsening. Small firms have divergent opinions: one in four expect the North American trade bloc to see economic performance worsen, but one in three expect improvement. Mid-size and large firms are less likely to predict worsening conditions, with the vast majority holding firm to expectations of stability or improvement.

GREAT BRITAIN

One in four firms predict Great Britain’s economy will worsen this year. Large firms are the least optimistic, with one in three predicting the country’s economic decline in 2019.

EUROPEAN UNION

82% anticipate stability or improvement in 2019; roughly one in five expect worsening conditions. Large firms are the least optimistic, with one in four expecting the EU trade bloc to underperform. Small and mid-size firms are more positive, with the vast majority anticipating stability or improvement.

Question 13-1

Rating of companies overall financial performance in 2018