By OGJ editors
HOUSTON, Sept. 14 -- High oil prices are taking a toll on US-based multinational companies, making senior executives less optimistic and more uncertain about the future, said analysts at PricewaterhouseCoopers LLP, New York.
"Many—particularly the 36% that see their companies as vulnerable to rising oil prices—are scaling back expectations for revenue growth, new jobs, and investments," they said in the report of a recent survey. Although 82% of the surveyed senior executives still believed that the US economy is growing, only 62% were optimistic in the second quarter about prospects over the next 12 months—"a sharp 15-point drop from the prior quarter," the report said. "One-third now counts itself uncertain, a 13-point increase."
The decline of optimism is most prevalent among 36% of executives citing rising oil prices as a potential barrier to corporate growth. Only 56% of this group remains optimistic; 42% is uncertain, according to the survey.
The report noted flagging optimism among companies that seem themselves as vulnerable to oil price increases. Currently, 66% of this group continues optimistic, down from 80% in the prior quarter. The survey indicates 59% remaining optimistic about the world economy—off 8 points—with one-third uncertain.
Meanwhile, surveyed executives said revenue growth is slowing, and growth targets have been reduced for the third consecutive quarter. The latest 12-month goal is a 7.2% increase, off from 8.1% in the prior quarter.
Costs are up, but pricing is not keeping pace, and gross margins are softer. Increased costs are reported by 45% of the respondents, but only 37% mentioned increased pricing. "And, although improving margins are reported by 36% (consistent with the prior quarter), there has recently been a narrowing from their strong showing in late 2004," the report said. "Purse strings are tightening. Fewer executives are planning major new investments (47%, off 12 points from the prior quarter) and net new hiring (46%, off 11 points)."