Middle-market companies expect revenue growth to moderate in the next 12 months, reflecting their lack of confidence in the U.S. and global economies and worries over higher health-care costs and new government regulations. All that is creating an uncertain financial picture for the firms, making them more likely to hoard cash than deploy it in hiring and capital expenditures.

In an inaugural middle-market survey by GE Capital and the Fisher College of Business at Ohio State, 1,002 C-suite executives at middle-market companies projected sales growth to slow to 7% on average in the next 12 months, compared with the 8.4% growth they reported for 2011.

The slowdown is notable because the approximately 195,000 firms that make up the middle market (defined as companies with between $10 million and $1 billion in sales) constitute about one-third of the U.S.’s nongovernment GDP, according to Anil Makhija, academic director of the partnership between GE and Ohio State, dubbed the National Middle Market Center.

“Middle-market revenue growth is still robust but moderating,” Makhija, a finance professor at Fisher, says, pointing out that S&P 500 firms forecast lower sales growth than the middle market — 4.7% — for 2012. “But there are clearly challenges they have identified that logically lead to this moderating confidence.”

Fifty-nine percent of the middle-market firms said the cost of health care will be particularly challenging, and 45% cited the impact of new government regulation. On a micro level, the ability to maintain margins was of greatest concern to 34% of the middle-market businesses. “All these are interrelated,” says Makhija. “If you have higher health-care costs or greater regulatory burden, that translates into a more challenging profit-margin situation.”

Because margins may be squeezed and revenues pressured, middle-market companies may not be that aggressive spending their excess cash, the survey found. When the C-suite executives were asked where they would allocate an additional $1 of investment, 41% said they would hold on to the cash or put it in liquid financial instruments.

But only 7% said they would use it to add personnel. “That lack of a commitment to hiring spells trouble for the U.S. economy, as the middle-market companies proved to be a major job generator while the economy gathered steam in 2011,” the National Middle Market Center said in a statement. Middle-market firms added 943,000 jobs in the past 12 months, a 2.3% uptick, compared with the overall growth rate in U.S. private payrolls of 1.7%.

“I would have expected the hiring number to be higher,” says Makhija. “With lower revenue growth hiring will slow, but I didn’t think it would be only 7%.”

Of the six sectors identified in the survey, services companies indicated the greatest willingness to hire, with 14% of executives saying they would add to head count.

Across all sectors of the middle market, confidence in the U.S. and global economies was low, with 15% of executives saying they are confident in U.S. economic prospects and 7% feeling that way about circumstances globally. Indeed, the survey respondents were more confident about their local and regional economies. “They have more control in their local environment and they know the environment better, so they feel more confident,” Makhija says.

The survey of chief executives, CFOs, and other C-suite executives was conducted in March on a sample of companies reflective of the larger population of middle-market firms. The National Middle Market Center plans to conduct the poll four times a year and release the results the fourth Wednesday following the end of each calendar quarter.