As the latest round of quantitative easing (QE3) commences, this significant government investment will present many lending opportunities for credit unions. QE3 will drive investment in private businesses, boosting corporate profits, which will enable companies to finance expansion projects and invest in value-added business services, like consulting and leasing companies. Such service industries are prime lending targets for credit unions because they are mainly composed of regional small businesses. Furthermore, these types of operators will likely be attracted to the lower fees and transaction costs or specialty services offered by credit unions.
With QE3 expected to increase private investment, IBISWorld has identified 10 U.S. value-added service industries that rely heavily on corporate profit to drive revenue.
Increased corporate profit has allowed companies to use IT consultants to further automate systems and decrease costs. In the five years to 2012, revenue from this industry is expected to increase at an annualized rate of 3.3% to $327.5 million. In 2013 alone, the industry is projected to experience a 2.9% rise in revenue.
Similar to IT consultants, IBISWorld expects the management consulting industry to benefit considerably from QE3. Industry growth has been sluggish, as demand from government agencies and corporations declined. As a result, industry revenue grew at an annualized rate of only 0.1% in the five years to 2012, totaling $160.4 million. However, the infusion of funds expected from QE3 will boost corporate profit, which will help this industry grow 5.1% in 2013.
Investors selling their investments during the recession to limit losses boosted industry revenue throughout the past five years, resulting in annualized growth of 4.4%. QE3 is expected to continue this trend because higher corporate profit will ultimately lead to an increase in trade volume across securities as investors seek to diversify their portfolios.
The expert networks industry comprises companies that act as intermediaries between experts in a particular field and entities that need specific expert insight. This industry is projected to grow 4.8% in 2013, with QE3 playing a major role in its performance.
Although tight lending conditions continue to keep the commercial leasing industry growth down, the launch of QE3 is expected to give the industry a much needed boost. An increase in corporate profit will give businesses extra cash to spend on expansionary efforts, which should result in more commercial leasing. Furthermore, QE3 is expected to buoy real estate prices, which should further assist the industry in returning to prerecession growth. In 2013, IBISWorld forecasts industry revenue will grow 5.5%.
As the economy returns to growth and QE3 encourages rising corporate profit, companies will spend more on outsourced security services. In 2013, IBISWorld forecasts that industry revenue will increase 5.2%.
When corporate profit rises, businesses often allocate more money to marketing. In addition to the assist by QE3, sustained growth in consumer spending and sentiment will loosen businesses’ purse strings. As businesses start investing more in market research, industry players will be able to increase prices for their services, further bolstering market research revenue. Altogether, these factors will provide a platform for an expected revenue increase of 3.3% in 2013.
The charter flights industry is particularly sensitive to changes in the corporate sector because corporations and large businesses account for about 40.0% of its revenue. Growth in corporate profit is helping to fuel a 4.8% recovery in private jet use in 2012, bringing industry revenue to $14.5 billion. Despite an earlier rebound, revenue is projected to rise only 1.0% in 2013.
Business coaching relies on demand from middle and senior management of U.S. corporations, which makes it vulnerable to companies’ declining corporate profit as clients look to cut unnecessary costs. In 2013, industry revenue is expected to increase 6.0%. For the most part, this growth will come from an 8.4% increase in corporate profit, supported by QE3, which will allow businesses to spend more on training programs.
For fleet car leasing, strengthening corporate profits, supported by QE3, are expected to continue supporting gradual industry revenue growth during the next five years. Nevertheless, the lingering effects of the cost-cutting measures that businesses took during recession ultimately put detrimental pressure on fleet leasing companies. Fleet car leases require a longer-term spending commitment from business, similar to hiring new employees. As a result, IBISWorld expects minimal industry revenue growth of 0.3% in 2013.
Eben Jose is a credit union industry analyst with IBISWorld Inc.
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