CEO Confidence Continues to Rise, Though Significant Employment Growth Not Expected Until 2012

Continuing its upward trend, Chief Executive Magazine’s CEO Confidence Index rose in February. The Index, the nation’s leading monitor of CEOs’ economic outlook, is up 1.02% from its three and a half year high in January, reaching a score of 6.39 out of a possible 10. Over 70% of the CEOs surveyed predict that business conditions will be at least ‘good’ moving forward.

Though the future looks brighter, there are indications that business recovery will continue to be slow. A key indication is that CEOs predict employment growth will be small, if there is growth at all. Almost 41% of CEOs said that they will neither increase nor downsize their workforce. For those that do expect an increase, however, expectations are modest. Almost three quarters of the 48% who expect an employee increase expect it to be by less than 10%. One CEO explained this by saying, “Companies have found ways to make money without the same level of employees. The job numbers won’t come down anytime soon.”

Revenue, on the other hand, is something that CEOs do expect to increase. Almost 80% of CEOs expect that their revenues will rise, and almost 35% predict that these increases will be by more than 10%. Though these expectations sounds promising, they may not be indicative of high levels of unit growth. This rise will be due to an increase in price rather than an increase in volume, according to one CEO. His cautious sentiment is echoed by another who says, “While revenues will be up, expenses due to loan losses, and more significantly the impact of government regulations will cause our net income to remain flat, or possibly decline slightly. We can’t make enough money to offset the expense of the regulatory changes.”

In spite of these comments, the poll did show that almost 71% of CEOs expect their profits to increase, with 43% of CEOs expecting that growth to be between 10% and 19%.

The main concern for these executives has become the country’s current political and regulatory hurdles. CEOs do, however, continue to have hope that their businesses are on the path to new growth. Indicative of what other CEOs are likely experiencing, Eric Spiegel, CEO of Siemens Corporation for the United States Region (with $25 billion in sales), commented, “We are a long cycle business so that orders today turn into sales on average in 18 months. Orders are up close to 20% in the first quarter which means that sales may be up by that amount by the middle of 2012.”

CEO Confidence Index – February 2011

Respondents: 208

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?