Uncertainty Holds Back Middle Market CFOs’ Spending Plans

Middle market companies often see a connection between growing certainty and increased capital spending, according to a recent PYMNTS Intelligence report. The July survey of 60 chief financial officers at U.S. companies with $100 million to $1 billion in annual revenue revealed that firms with rising certainty were 47 percentage points more likely to raise capital spending compared to those with declining certainty.

CFOs require a clear view of conditions before expanding, yet they acknowledge that a completely predictable economy isn't necessary for growth. Certainty functions like visibility on a highway, allowing companies to move forward more comfortably. Among firms whose certainty improved over the past year, 56% planned to increase headcount, while 47% intended to boost capital spending.

Even with modest declines in certainty, 91% of CFOs would adopt a defensive stance, while only 5% would cut capital spending. Sales expectations and borrowing costs emerged as key sources of uncertainty affecting investment decisions, with customer demand also identified as a significant factor. Despite the presence of uncertainty, 47% of firms plan to increase capital spending over the next year, along with 42% intending to add employees.

Companies with low uncertainty are more likely to expand headcount, with 56% expecting to do so. These findings indicate that middle market firms can continue to grow even amid some level of uncertainty, as long as executives feel confident enough to commit resources to long-term plans.