The National Center for the Middle Market every quarter gauges the mood of the word's fourth-biggest economy.
I'm not talking about Germany.
The centre, a partnership of Ohio State University's Fisher College of Business and GE Capital, studies the forgotten "middle" of the U.S. economy – the roughly 197,000 companies that generate revenues of between $10-million (U.S.) and $1-billion. Those companies – neither small nor massive – generate output of some $3.8-trillion a year, which is more than Germany, the world's fourth-largest national economy.
In many ways, these companies are more reflective of the U.S. domestic economy than their larger and smaller cousins.
America's big multinational companies are economic symbols, but they their global footprints make them poor mirrors of the broader U.S. economy, which relies relatively little on exports and international investment. "Middle" firms, on the other hand, are rooted in their communities and tend to conduct most of their business at home or regionally. But they tend to have a longer lifespan than smaller companies, and they employ more people.
There is one thing that business operators have in common, no matter how big or small their companies: a distaste of government. The middle market centre this week released its latest first-quarter survey of 1,000 executives. The poll showed that 92 per cent of respondents feel the cost of health care is a challenge – 57 per cent called it "highly challenging." More than 80 per cent agreed that "uncertainty of how government actions will impact my business" was either somewhat challenging of highly challenging. Sixty-four per cent expressed frustration with corporate taxes, although that was a big drop from 72 per cent in the fourth-quarter survey. (The shift could reflect the resolution of the "fiscal cliff" at the start of the year.)
But sentiment surveys are tricky things. Consider the Conference Board's consumer confidence index. It is bouncing all over the place, rising to 68.1 in April from 61.9 in March, when it plunged from 68 in February.
More important than what consumers and executives feel is what they do. And despite all their misgivings about government policy, the executives of "middle" companies are getting ready to spend money: 63 per cent in the Middle Market survey said they are looking for opportunities to invest extra cash, compared with only 50 per cent in the second quarter of last year.
That could be an important shift. The strength of corporate profits over the past couple of years is out of line with the underwhelming nature of the recovery. "Uncertainty" about government policy is a favourite explanation for why executives are sitting on piles of cash. Uncertainty still exists, but perhaps managers are tiring of sitting on the sidelines. That could be the game changer for which we've been waiting.