CEO Confidence on the Rise
While public company CEOs foresee growing business opportunities and rising sales in the next six months, their counterparts at the private companies are still wary about the economic prospects.
December 22 2010 by ChiefExecutive.net
CEOs are more optimistic about the U.S. economy now than they were few months ago. Economic pundits opine that as President Obama tries to reset the White House’s relationship with corporate America, business leaders are increasingly confident that soon all will be well with the U.S economy and that they intend to increase their workforce and improve sales. However, CEO confidence at privately held companies is still dwindling with majority of the CEOs believing the economic conditions will not improve in the near future.
According to the Business Roundtable’s Fourth Quarter CEO Economic Outlook survey the CEOs of America’s leading companies plan increases in employment, sales and capital expenditures over the next six months indicating improving economic and business conditions in the country. Its Index saw an increase of 15 percentage points jumping from 86 in the third quarter to 101 in the fourth quarter of 2010.
The survey found that 80 percent of CEOs expect sales to increase, and 59 percent expect their companies to increase capital expenditures. CEOs expect the economy to grow at a 2.5 percent rate in 2011. The survey also found that 45 percent of the CEOs see their organizations adding staff over the next six months. That’s a serious jump from the third quarter of this year, when only 31 percent thought they’d be in hiring mode.
“Demand is returning, as evidenced by anticipated sales increases, and that is good news. When demand increases, capital expenditures and employment follow — which is what we expect to see in the next six months,” said Ivan Seidenberg, the Business Roundtable chairman and CEO of Verizon Communications in a media release.
Interestingly, Chief Executive magazine’s CEO Confidence Index, the nation’s leading monthly CEO Confidence Index, also revealed similar CEO sentiment with the CEO Confidence Index increasing 14.7 points (14.4%), rising to 102.1 following the results of the November elections. All five components of the index showed double-digit gains in November.
Echoing the popular CEO sentiment, Chief Executive Magazine’s survey aptly discovered that despite the growing positive sentiment, some CEOs still believed the Congress and the Administration needs to take immediate steps to improve the business climate further. President Obama’s recent meeting with corporate heads is perhaps seen as a move to create a business friendly atmosphere and ward off fears that U.S administration was anti-business, economic experts point out.
Additionally, the deal between the Obama administration and Congressional Republicans announced recently extending Bush-era tax cuts for high-earners, as well as extending benefits for the long-term unemployed is also seen as a move towards building confidence moving forward, Andre Mayer, senior vice president for communications and research at Associated Industries Massachusetts, a Boston-based business lobbying group told Mass Live.
Likewise economic confidence even among the nation’s small business owners also continued to improve in November. The monthly Discover Small Business Watch index rose to 87.2 in November, up 3 points from 84.2 in October — the third consecutive monthly gain, and nearly 11 points higher than a year ago.
The National Federation of Independent Business’ optimism index also rose 1.5 points to 93.2, the highest reading since December 2007 when the recession started. The downturn, which was the longest and deepest since the Great Depression of the 1930s, officially ended in June 2009. The index was up for a fourth straight month in November and continued to outperform all recovery periods since 1973, the NFIB said in a media release.
Interestingly, the PwC 13th annual global CEO survey released early this year, had rightly predicted the business sentiment for 2010 with the 81 percent of survey respondents believing they were confident of their prospects for the next 12 months, while only 18 per cent said they remained pessimistic. The results compare with 64 per cent who said they were confident a year ago and 35 per cent who were pessimistic in 2009.
Meantime, another recent survey from PricewaterhouseCoopers’ known as Private Company Trendsetter Barometer which tracks the business issues and standard industry practices of leading, privately held US businesses, reported declining confidence among private company CEOs.
Only 39 percent of the nation’s leading private company executives surveyed for PwC US’s Private Company Trendsetter Barometer voiced optimism about US economic growth over the next 12 months – down from the previous quarter’s 45 percent and four points below a year ago. However, 45 percent of companies with international operations were optimistic about US economic growth, markedly more so than their domestic-only peers (35 percent). As for international marketers’ optimism about the world economy, that rose to 43 percent (up six points from the second quarter).
Similarly, Conference Board’s CEO Confidence measure also indicated a negative sentiment among its member CEOs with its index still depicting a downward trend. The Conference Board Measure of CEO Confidence, which was unchanged in the second quarter of 2010, declined in the third quarter. The latest measure now reads 50, down from 62 last quarter. Its fourth quarter results however are yet to be released.