3 Reasons Why CEO Confidence Surged in November (And 3 Reasons Why It Won’t Stay That Way)

Confidence is on the upswing in November with a 7.1 percent jump in expected improvement for overall business conditions. Optimism is up in terms of revenues, profit, and capital expenditures. Over 40 percent of CEOs plan to increase hiring.

November 10 2011 by ChiefExecutive.net


When Chief Executive polled its CEOs last week about their overall perceptions of business conditions, sentiments seemed to be running high. The Index, our monthly gauge of CEOs’ perceptions of overall business conditions, finally saw an uptick in optimism after a general decline over the year.

Confidence jumped 7.1 percent to 5.23 out of a possible 10, bringing confidence back to levels seen this summer. Though overall confidence has dropped 18 percent since the Index’s 2011 high of 6.39 in February, November’s jump seemed to be an indication that conditions are starting to recover.

Here are three things that happened in October that helped boost CEO confidence:

  1. Financial markets surged
  2. An agreement was made on euro-zone debt crisis
  3. Corporations saw solid Q3 earnings

Projections for key business metrics also saw a boost. Over 69 percent of CEOs expect to see increased revenues over the next year, a 15 percent increase from October.

After five months of increased hiring hesitation, more than 40 percent of CEOs expect to increase their workforce over the next 12 months. In September, fewer than 30 percent of CEOs planned to hire, a huge drop from April’s 48.84 percent.

In addition to increased revenue and hiring projections, CEOs also are optimistic about profit projections. Over 58 percent of CEOs expect to see increased profits compared with just 46 percent one month ago.

Capital expenditures are also slowly recovering; almost 45 percent of CEOs expect to increase cap ex. Though down from February’s 54 percent, cap ex increases are still an indicator of positive business investment.

Though there is continuous CEO discontent with U.S. political leadership and a consensus that regulations are stifling a full economic recovery, there are signs that things are looking up. One CEO said, “We are seeing former clients become strong financially again and returning to us to receive our public relations/marketing/media relations services, which they discontinued at the height of the recession. Smart executives know that visibility equals market share, and market share is fairly inexpensive now. While others sit out on the sidelines, visionaries are getting back in the game.”

Another CEO noted, “U.S. based corporations are cautiously giving up some cash,” which is progress in the right direction. Another has found success in specific markets: “We have been fortunate to identify specialty niches with high demand and a limited qualified supply of service providers. So while we see the overall economy as weak, our growth has come from recognizing these niches early and positioning ourselves as early market leaders.”

These numbers and comments, however, were compiled between November 1 and November 4.  Since then, there have been political and economic developments that could potentially push confidence back down:

  1. Italy may be poised to be the next Greece
  2. U.S. added fewer jobs than expected in October
  3. Oil prices are up more than 20 percent in 5 weeks

Let’s hope the second half of November can be more like October.

CEO Confidence Index — November 2011

Respondents: 195

October 2011 November 2011 Monthly Change
CEO Confidence Index 4.88 5.23 7.1%

 

What do expect overall business conditions to be like one year from now on a 1 -10 scale? (10 = Excellent)

What is your assessment of current overall business conditions on a 1-10 scale? (10 = Excellent)

Over the next 12 months, what changes do you forecast for your firm compared to the past 12 months?