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CEO Confidence Continues To Recover

ARE BUSINESS LEADERS BECOMING MORE SANGUINE about the economy? According to Chief Executive magazine’s CEO Index, which measured another strong …

ARE BUSINESS LEADERS BECOMING MORE SANGUINE about the economy? According to Chief Executive magazine’s CEO Index, which measured another strong resurgence in May based on 153 responses collected from America’s top executives, optimism—albeit in a cautious tone among business leaders—is on the rise. In May, all components of the CEO Index continued to increase after a strong recovery in last month’s index.

The CEO Confidence Index rose 9 percent, to 75.7 points in May, for a 48 percent gain since it reached its lowest point in February 2009. Of the five subindices, the Business Conditions Index, used to measure confidence in business conditions, made the biggest gain, jumping more than 22 percent, to 68 points. Since reaching an all-time low just two months ago in March 2009, the Business Condition Index has rebounded 83 percent. CEOs reckon we’ve hit bottom.

For the second straight month the Future Confidence Index, which measures the outlook of employment, economic and capital spending opportunities over the next quarter, is higher than current confidence, implying that CEOs think business conditions will improve in the coming quarters. Similarly, CEOs’ confidence in current business conditions has also improved, with the Current Confidence Index, which measures the confidence of current employment, economic and investment conditions, increasing 4 percent to reach nearly 70 points, the highest point since November 2008 when the subindex started experiencing steep declines.

Demonstrating CEOs’ growing confidence in the economy, Jim Riley, CEO of Laclede Chain Manufacturing, said, “This is actually a great time for companies and the country to do some cleansing and prepare for a solid future.”

In line with other indices, the Employment Confidence Index, a subindex used to calculate overall confidence in the job market that has been a leading indicator of employment conditions, also increased 10 percent, to nearly 52 points in May. Since reaching an all-time low in December 2008, the Employment Confidence Index has rebounded by 58 percent. Furthermore, even though still very low, the percentage of executives who said employment will either increase or stay the same over the next quarter doubled to 14 and 33 percent, respectively, compared to last month.

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