March 2014 Analysis: CEO Confidence Achieves Highest Rating in Three Years

The CEO Confidence Index, Chief Executive’s monthly gauge of CEOs’ expectations for business conditions over the next 12 months, jumped more than 5 percent in March, landing at 6.2 out of a possible 10. This is the highest rating CEOs have given in the survey since April 2011. CEOs also rated current conditions more than 4 percent higher than in February. At 5.75 out of 10, this is the highest rating of current conditions since December.

Despite the clear increase in optimism reflected in the Confi- dence Index ratings, comments received from the CEO respon- dents show a more cautious sentiment prevailing. “The feeling and talk about the economy is positive, but the ramification of the past few years keeps the enthusiasm in check,” said one CEO. “It will require quarter-over-quarter and year-over-year results before the conservative component becomes just a normal part of the deal and not a lingering thought.”

The expectations executives have for their own businesses have improved compared to last year, with more than 70 percent of CEOs now expecting their firm’s revenue to increase over the next 12 months. Last year at this time, only 66 percent of CEOs expected revenue growth. Despite this positive indicator, clearly some caution remains. Only 48 percent of CEOs expect an increase in capital expenditures over the coming year. This is a modest increase from the March 2013 survey, when 45 percent of CEOs had increased expectations for capex. Similarly, 46 percent of CEOs now expect an increase in their number of employees, which is a 5 percentage point increase from last year.

A common sentiment from CEOs is regulatory uncertainty and dysfunction in Washington. “Until we can predict the costs of labor, capital expenditures, regulation and labor we cannot risk scarce cash reserves,” noted one business leader. “Does anyone trust laws, regulations, rules made in Washington?”