Private-company CEOs' confidence in the U.S. economy is driving plans for expansion, according to PwC US's latest Private Company Trendsetter Barometer. Sixty percent of the surveyed business leaders are optimistic about the US economy's 12-month outlook, marking a year in which the majority of Trendsetter CEOs have consistently voiced this sentiment – the longest optimism streak since the recession. Previously, the longest stretch of sustained optimism (since 2008) was the six-month period spanning 4Q 2010 and the 1Q 2011.

The gap between expectations for the U.S. and global economies is widening, according to those surveyed. Private companies are markedly more optimistic about the U.S. economy than the global economy, with just 39 percent of those surveyed expressing optimism about prospects abroad. Fifty-three percent remain uncertain, amid concerns about the Eurozone GDP forecast and mounting tensions in Ukraine and Venezuela.

"Private company leaders' optimism about the U.S. economy has strengthened, driven in part by promising and consistent data that points to a continued recovery," says Ken Esch, a partner in PwC's Private Company Services practice. "As a result, they are more confident about their growth prospects over the next 12 months."

Rich Stovsky, leader of PwC US's Private Company Services practice, adds: "We have seen dramatic peaks and valleys in economic optimism over the past several years. Many private-company CEOs put significant initiatives on hold as they waited for signs of a sustained recovery. The consistent economic optimism we've seen from a majority of private-company leaders for a full year now is an important signal and suggests this latest uptick in confidence will be lasting."

Optimism is evident in private-company leaders' plans to expand through acquisitions, strategic alliances and joint ventures in the coming year, with 52 percent planning some sort of business expansion initiative. That is ten points higher than a year ago. In the next 12 months, 24 percent say they plan to enter into a new strategic alliance (up from 17 percent a year ago); 20 percent intend to do a joint venture (up from 14 percent); and 19 percent plan to acquire another business (up from 11 percent).

According to a subset of respondents who answered additional questions about expansion plans, 72 percent plan to pursue some form of expansion in the next two years. More than three-quarters (77 percent) are pursuing opportunities in areas where their competitors already have a presence. Companies pursuing these strategies expect 10.4 percent growth over the next year, compared with just 4 percent expected growth for companies taking a more conservative approach.

Certain companies may be more conservative due to pressures to keep costs down or a belief that there is insufficient funding available, with 22 percent of respondents saying that lack of capital for investment is a concern. However, private-company leaders, overall, say that concern about other potential barriers to growth is waning. Trendsettercompanies are less worried about the impact of government intervention, with only 28 percent expressing concern about increased taxation (down 10 points from a year ago), and fewer companies citing apprehension about legislative/regulatory pressures – 44 percent, compared with 52 percent a year ago. Lack of demand as a barrier to growth has also decreased significantly, with 53 percent of respondents citing it as a concern, down from 66 percent a year ago and the lowest level since early 2007.

"After a quiet period in 2013, we're seeing a return of M&A and strategic alliances. Private companies are feeling increasingly comfortable with growth projections among potential partners or acquisition targets," says Esch. "With interest rates that are near historic lows, more businesses are seeing these types of business initiatives as important to achieving their multi-year growth plans."

Number of Private Companies Looking to Hire Is at a Three-Year High

Hiring continues to be a priority for private companies, with two-thirds (63 percent) of those surveyed planning to add new employees within the next 12 months – 11 points higher than a year ago and the highest in three years.

Companies remain highly targeted in their hiring plans. They expect to increase their composite workforce average by only 2 percent this year. A barrier continues to be the skills gap, with 28 percent of private companies citing lack of qualified workers as a growth impediment. The workers that are especially in high demand are technology workers (cited by 28 percent of companies) and blue collar workers (25 percent), including both semi-skilled/unskilled workers and those with specialized skills. Sales and marketing professionals are also highly sought after (22 percent), since such employees are critical to driving growth and new business for companies in expansion mode, which many of ourTrendsetter companies are.

"It's encouraging to see that the percentage of companies looking to hire is at its highest level since 2011," says Esch. "However, companies' cautious approach is keeping composite hiring low. This negatively impacts consumer purchasing power. Until significant numbers of people are added to the workforce, we can expect progress and growth to remain measured."

Additional Survey Findings

• More than three-quarters (81 percent) of private businesses anticipate increased sales over the next 12 months.
• Companies selling abroad expect notably higher revenue growth than their domestic-only peers – 10 percent versus 7 percent.
• Nearly one-fifth of Trendsetter companies initiated new borrowing in the past two quarters.