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CEO Confidence Index April 2004

Brighter Outlook On Employment Health Costs Remain A Concern

After two months of declining confidence, the outlook among CEOs toward the economy improved in April. In particular, they expressed optimism about employment and capital spending, although they remain deeply concerned about rising health care costs and their effect on corporate bottom lines.

The overall CEO Confidence Index, a broad measure of the mood in the corner office, rose 3.9 points, from 154.4 to 158.3, a gain of 2.5 percent. The Index, initially set at 100 in October 2002, hit a peak of 171.9 in January 2004, buoyed by a rising U.S. economic growth rate, low interest rates and a stable inflation outlook, among other factors. 

In April, the Employment Confidence Index jumped 9 points, or 6.1 percent, from 147.1 to 156.1. More than 95 percent of the CEOs surveyed said employment conditions either would increase or stay the same over the next three months. In recent months, this has proved to be a leading indicator of U.S. employment levels. The only decrease among the major indices this month came in Current Confidence, which dipped 1.4 points, from 162.7 to 161.3, a drop of less than 1 percent. 

With the current unemployment rate at 5.7%, near the 56- year U.S. average of 5.63%, CEO hiring is expected to remain steady.

 Nearly half of the 312 CEOs who responded to the survey said they expected their companies’ health care costs to increase by 11 percent to 20 percent in each of the next few years. Despite their frustrations and concerns over the U.S. health care system, a 60 percent of the CEOs said they do not want the federal government to play an increased role in the industry.

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