And the rebound continues.
Chief Executive’s CEO Confidence Index, our monthly gauge of CEO sentiment regarding the future of business conditions, rose to 6.03 out of a possible 10. The index climbed above 6.0 for the first time since May of 2011.
The Index’s increase continues a positive streak, as confidence has grown each month since October. Though confidence in business conditions over the next year are still mediocre, the consistent rise in expectations denotes a positive outlook for the future.
Infotonic CEO Michael Maturo said, “Most sectors, including my own, have spent the past few years cutting the fat and learning what’s truly essential to success. From this more realistic and comfortable position, innovation is blooming.”
This realistic and comfortable position is evidenced in expected CEO hiring practices. As recently as October, fewer than 30% (29.92%)of CEOs expected to expand their workforce over the next year. That hiring expectation jumped to 45.34% in February. This corresponds with the unemployment rate which dropped to 8.3% in January 2012. If CEOs continue with their plans to hire, we can expect to see the unemployment rate decrease more over the next year.
It is important to note, however, that CEO responses were taken before President Obama announced his budget for the 2013 fiscal year. The President’s budget plan relies heavily on increased taxes, and businesses can expect a hefty increase in their tax rates. Large employers’ tax load alone will increase by $174 billion.
Requiring CEOs to pay taxes in foreign markets and pay increased taxes if they bring their money back to the U.S. does not provide businesses with incentive to invest in the U.S. market.
When surveyed, Continuity Logic Chairman Peter Christensen said, “[R]apidly increasing regulation and uncertainty regarding future tax rates for LLCs (the high personal income tax brackets) are causing our company to shift growth away from the United States to overseas sources. Capital and labor can now be deployed globally, in an instant. If this administration continues to penalize risk taking in the U.S., the risk takers will move their business overseas, creating jobs and wealth abroad, rather than at home.”
These financial pressures on already hesitant chief executives is not a recipe for increased CEO confidence. It is possible that we will see the Index drop again in March, but only time will tell.
CEO Confidence Index — February 2012
|January 2012||February 2012||Monthly Change|
|CEO Confidence Index||5.78||6.03||4.3%|
What do you 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?