Following a year of consistently accelerating revenue and employment growth for middle market firms, growth appears to be slowing and stabilizing in the first quarter of 2015, according to the National Center for the Middle Market’s Q1 2015 Middle Market Indicator (MMI). The quarterly study found that while revenue and employment growth continue to be strong, the rate of increase has tapered off slightly, especially for payrolls.

Middle market companies, defined as those with revenue between $10 million and $1 billion, account for roughly one third of the total employment status of the U.S. and generate $10 trillion in annual revenue. Despite its relatively low profile, the US middle market is the fifth largest economy in the world.

“Despite its role in creating some 44.5 million jobs in this country, the middle market – much like a middle child – tends to get less attention than small business or large US corporates,” said Thomas A. Stewart, Executive Director, NCMM, a collaboration between GE Capital and The Ohio State University Fisher College of Business. “In our 13th quarter surveying this vital economic engine, our data show middle market companies expect financial and employment growth in 2015 and into 2016, but at a slower and more sustainable rate than last year. What remains to be seen is whether this is a pause before acceleration resumes or a return to a more normal rate of growth after a rapid run-up.”

Growth Strong but Slowing

Mean revenue growth among middle market companies increased to 7.4 percent in Q1 2015, one full percentage point higher than what firms reported in the first quarter of last year. All in all, the financial performance for middle market companies once again exceeded the revenue growth for the S&P 500, which was 2.9 percent.

Sixty-four percent of middle market companies reported improved past-year company performance in Q1, with companies at the high end of the middle market (revenues of $100 million to $1 billion) recording especially strong performance. While this represents a decline from the 70 percent of businesses that cited year-over-year performance improvements last quarter, the proportion of firms reporting deteriorated performance dropped significantly as well, from eight percent to just four percent.

While most businesses anticipate future growth, the outlook has dimmed from the previous quarter. At the end of 2014, nearly three-quarters of middle market firms reported expectations for future growth; that number has dropped to 59 percent for the current period. Mean total growth expectations for the next 12 months have dropped as well, from 6.0 percent last quarter to 5.3 percent today.

To read the full Q1 2015 Middle Market Indicator, click here.