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Trendsetter barometer® 20 years at a glance September 2015 What’s inside: Will US GDP rise a year from now? Peering into the payroll future Wage oracle Ahead of the borrowing curve On the same pricing page Revenue forecasts for Trendsetter companies outstrip GDP projections Emerging markets: Reliable revenue growth Will US GDP rise a year from now? Trendsetter companies’ optimism/pessimism about the US economy has often been a good leading indicator of where US GDP will head a year later. US GDP year-over-year % of Trendsetter companies optimistic about the US economy 10% 100% 8% 80% 60% 6% 40% 4% 20% 2% 0% 0% -20% -2% -40% Trendsetter economic sentiment foretold the Great Recession and subsequent recovery. -4% -60% -80% -6% -100% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: PwC’s Trendsetter Barometer quarterly survey question: "Looking ahead over the next 12 months, how optimistic or pessimistic do you feel about the US economy?" Oxford Economics / Haver Analytics The numbers in the right Y-axis are the percentage of Trendsetter respondents answering “optimistic” minus the percentage answering “pessimistic.” Wage oracle If Trendsetter private companies say they'll raise wages in the next year, chances are you'll see similar movement at US companies generally. Trendsetter companies’ mean expected hourly-wage increase in next 12 months US employment cost index – wages & salaries of private-industry workers 4.5% 6% 4.0% 5% 3.5% 3.0% 4% 2.5% 3% 2.0% 1.5% 2% Trendsetter companies foretold the plunging rate of wage increases before the previous two recessions, as well as signaled rising wages ahead of the economic recovery. 1% 1.0% 0.5% 0% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: PwC’s Trendsetter Barometer quarterly survey question: “Approximately, what percent salary increase for the typical hourly workers have you provided for in your budget over the next 12 months?” Oxford Economics / Haver Analytics Peering into the payroll future The monthly jobs report is about the past. But what about the future? Trendsetter’s leading indicator gives you a heads-up on US headcount. % of Trendsetter companies increasing headcount in next 12 months Quarterly change in US private payrolls 90% 1,000 80% 500 70% 0 60% -500 50% 40% -1,000 30% Trendsetter companies signaled the US labor market's decline heading into the previous two recessions, as well as the subsequent recoveries. 20% 10% -1,500 -2,000 0% -2,500 1995 2000 2005 2010 2015 Source: PwC’s Trendsetter Barometer quarterly survey question: “Is your business planning to add or reduce the total number of fulltime-equivalent employees over the next 12 months?” Oxford Economics / Haver Analytics The numbers in the left Y-axis are the percentage of Trendsetter respondents answering “add employees” minus the percentage answering “reduce employees.” Ahead of the borrowing curve When Trendsetter private companies say their credit availability has improved, chances are you’ll see business loans increase in the overall economy too, as was the case heading into the latest recovery. C&I loans in bank credit quarter-overquarter annualized % of private companies with greater credit availability in the past quarter 40% 25% 30% 20% 20% 15% 10% 10% 0% 5% As credit availability for Trendsetter companies bounced sharply back from its recession low-point, bank credit gradually became more widely available for other companies too. -10% -20% 0% -5% -30% -10% 2008 2009 2010 2011 2012 2013 2014 2015 Source: PwC’s Trendsetter Barometer quarterly survey question: “In terms of banking relationships this past quarter, has your business’ credit line or amount of credit availability increased, decreased or stayed the same?” Oxford Economics / Haver Analytics The numbers in the right Y-axis are the percentage of Trendsetter respondents answering “increased” minus the percentage answering “decreased.” On the same pricing page Trendsetter price movements tend to coincide with changes in the producer price index, indicating what the broader market will bear. US producer price index quarter-overquarter annualized % of Trendsetter companies that raised prices in the past thee months 15% 30% 10% 20% 5% 10% 0% 0% -5% -10% -10% This coincident economic indicator also had some leading power early in the economic downturn. -15% -20% -30% -20% 2008 2009 2010 2011 2012 2013 2014 Source: PwC’s Trendsetter Barometer quarterly survey question: "In the past three months, have your own prices gone up, down or stayed the same?" Oxford Economics / Haver Analytics The numbers in the right Y-axis are the percentage of Trendsetter respondents saying prices went "up" minus the percentage saying “down.” 2015 Revenue forecasts for Trendsetter companies outstrip GDP projections for the US and world economies GDP growth forecasted for 2015 2.5% Revenue growth for US private companies US economy 9.8% Source: PwC’s Trendsetter Barometer, PwC, Q2 2015 GDP figures sourced from Oxford Economics World economy 2.5% 1.6% Eurozone 6.6% China 7.1% India -1.6% Brazil -3.5% Russia Emerging markets: Reliable revenue growth Trendsetter private companies that sell in emerging markets generally project higher revenue growth than their domestic-only peers, with investment in those markets being part of their long-term strategy. Revenue growth rates for companies selling in emerging markets vs those selling in the US only: 2009 2010 2011 2012 2013 2014 2015 8.6% 12.6% 10.1% 9.4% 7.3% 11.1% 12.6% 5.4% 8.4% 8.4% 7.6% 8.0% 7.9% 9.4% Emerging markets US only Source: PwC’s quarterlyTrendsetter Barometer quarterly survey question: "What is the average percentage of revenue growth you expect for your company over the next 12 months?" Emerging market data began to be collected in 2009. Since 1995, PwC’s Trendsetter Barometer Business Outlook has tracked the views of top executive officers at privately held US businesses and the trends these reveal. This quarter, we spoke with 225 chief executive officers (CEOs/CFOs), including 127 from companies in the product sector and 98 in the service sector. To find out more about private-company trends and to discuss the survey findings, please contact: Rich Stovsky Private Company Services Leader [email protected] Ken Esch Trendsetter Partner Sponsor [email protected] Margaret Young Partner, Private Company Services [email protected] Visit us online at http://www.pwc.com/us/pcs © 2015 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. 27922-20145