The overall performance of middle market companies has steadily improved for years. As a result, nearly three-quarters (71 percent) of middle market firms surveyed for the Q4 2017 Middle Market Indicator (MMI) released  by the National Center for the Middle Market (NCMM) reported improved year-over-year company performance. Even more impressive, this is the highest percentage in the MMI's history and nearly 10 percent higher than the average.

A portion of this improved performance can likely be attributed to increased revenue growth – 7.6 percent this quarter – which represents a steady increase from seven percent in Q3 and nearly a percentage point above the six-year historical average.

These factors likely contribute to middle market companies' exceeding confidence in the local, national and global economies. Confidence in local economies matches the previous quarter's all-time high of 88 percent, while confidence in the national (86 percent) and global economies (75 percent) are at their second highest.

"The U.S. economy did very well in 2017, and it's clear from the data that the middle market deserves the lion's share of the credit," said NCMM Executive Director Thomas A. Stewart. "The ratio of companies saying performance was better to companies saying it had weakened was an 12-to-1 in last year.  To put that in perspective, that ratio was 5-to-1 when we started the MMI in 2012. So it's unsurprising middle market leaders feel more confident about the economy than they ever have."

It is clear that middle market companies are pulling back on hiring. Although the employment growth rate remains above the historical average of 3.9 percent, the Q4 rate of 5.2 percent continues a steady decline throughout 2017 and the lowest rate since Q3 2016. Despite this decline, core middle market firms that represent $50 million to $100 million in revenue are experiencing a steady increase, with a 7.1 percent employment growth rate in Q4.

Despite the recent hiring dip, half of all surveyed executives identified talent as a top long-term challenge, especially as eight out of nine leaders estimate that labor market conditions will tighten over the next few months.

"Especially with talent remaining a priority, middle market companies appear to be making significant investments internally," said NCMM Managing Director Doug Farren. "For example, nearly 40 percent are planning to increase their investment in workforce training and education, and 43 percent said they use wage increases as a retention tool."

In addition to talent, cost remains another top concern for middle market executives, with the percentage identifying it increasing to 22 percent from 16 percent one year ago. Nearly half (48 percent) of companies expect to raise prices in 2018 – an increase from 40 percent a year prior and the highest percentage in the MMI's history. The report shows that executives, particularly those at smaller companies, are especially worried about managing health care costs.

For additional survey data and infographics, including in-depth looks at regional variations, hiring/talent acquisition efforts and other business concerns among middle market companies, visit http://www.middlemarketcenter.org.