US Companies Expect Economic Improvement, But Ready for Downturn

When it comes to the business environment in 2012, large US companies are hoping for the best but feel prepared for the worst. In a November, Greenwich Associates asked 114 US companies with annual sales of at least US$500m about their expectations for the 2012 business and economic environment, strategic steps they are taking to prepare for the year ahead and their assessments of various government economic policies.

The key findings of the research are:

• Forty-seven percent of participating companies have a positive view of the business environment over the next six to 12 months, while roughly one in five has negative expectations for the business environment.
• Nearly three-quarters of large US companies rate themselves as prepared to handle economic risks such as a double-dip recession or inflation and 96% believe they are prepared to deal with financial risks such as another credit crunch.
• Despite confidence in their level of preparedness, companies express high levels of concern over a series of looming risks. Ranked at the top of that list of concerns is the impact of government regulations.
• Large US companies view long-term federal deficit reduction as a top priority that should take precedence over efforts to stimulate the economy and fend off recession.

Improved Credit Conditions

A primary reason for company’s confidence in their preparation for the year ahead is the improved credit market conditions in which large US companies have been operating for the past year. Nearly 80% of the large US companies participating in the Greenwich Associates 2011 US Large Corporate Banking Study report having absolutely no difficulty obtaining bank credit. Seventy percent of large US companies say they have absolutely no trouble funding in commercial paper markets, up from 63% last year and 47% in 2009.

The results are even more positive and impressive in debt capital markets, in which 81% of large companies say they have no problem raising funds, up from 67% in 2010 and just 38% in 2009. Reflecting this favourable environment, large US companies last year maintained the share of their overall available credit currently outstanding at a comfortable 16-17%.

“Most of the companies participating in the November study report no change to these favourable funding conditions over the past three to six months,” said Greenwich Associates consultant Don Raftery.

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