U.S. companies are finding it more difficult to grow their revenue now than at just about any time since the financial crisis.
Second-quarter revenue growth for companies in the Standard & Poor’s 500 index is expected to be just 2.2 percent compared with an average 7.3 percent quarterly increase since the fourth quarter of 1998, according to Thomson Reuters data based on Wall Street analysts’ forecasts. Take out the supercharged sales of Apple and the picture is even weaker – with growth of only 1.9 percent for the current period.
Slowing revenue growth has wider implications for the U.S. and global economies. Companies are less likely to hire and more likely to fire to curb costs so that they can reach their earnings targets. Second-quarter earnings expectations for the S&P 500 are for growth of 6.7 percent, and 5.8 percent excluding Apple.
While the U.S. economy remains anemic, its relative strength compared with Europe, and the lack of a big bright alternative for investment in Asia, may provide some protection for the American workforce when any companies do slash jobs. The savagery of cuts during the financial crisis also doesn’t give many companies a lot of slack to take out.
Going forward, forecasts for revenue don’t show any real signs of improving. Thomson Reuters’ revenue growth forecast for the S&P 500 is for 2.9 percent for the third quarter, 4.1 percent for the fourth quarter and 2.7 percent for the first quarter of 2013.
The U.S. economy may not be in a recession. And the private sector may be doing better than the public sector. But economic growth is nowhere near what it should be. This is not prosperity. That should be the goal. Prosperity, not just mere “recovery.” Americans must not permit their expectation to be redefined downward to expect 2% growth as “trend growth” and the New Normal from here on out.