CEOs Anticipate Improved Business Conditions By Next Year

Despite CEOs’ confidence ratings in future business conditions being flat since April, we believe their confidence may be about to break out of its holding pattern.

Despite the fact that CEOs’ confidence ratings in future business conditions have been flat since April, we believe confidence may be about to break out of its holding pattern.

With a rating of 7.01 (on a scale of 1 to 10 with 10 being the highest), August’s rating (for expected business conditions 12 months from now) is flat compared with July’s 7.00, June’s 7.02 and May’s 7.03. However, judging by some comments from business leaders responding to the survey, CEOs feel that business conditions are poised to move upward.

Scott Heim, for example, president and chief executive of Evo Inc., said his company is experiencing an increase in food equipment sales due to growing capital expenditure investments from hotels, restaurants and grocery stores.

“[Our] Food equipment sales are growing by more than 20%…and the confidence of restaurant operators appears only to be strengthening as the year progresses,” Heim said. “In addition, we are experiencing a surge in international interest and a growing number of ‘request for quotes.’ Even the U.S. military is beginning to seek quotes for food equipment for remodeled commissary locations and kitchen sites.”

“Our Food equipment sales are growing by more than 20%…and restaurant operator confidence appears to be strengthening as the year progresses.”

Meanwhile, Steve Townes, founder and CEO of Ranger Aerospace, said his company’s leaders are “bullish, with strong underpinnings for growth in our served sectors.”

“Market forces in numerous regions are pushing up the growth of air cargo, including the burgeoning impact of e-commerce,” Townes said. “Accordingly, we are steadily expanding our air cargo services, products and leasing subsidiary through higher levels of capital investment, opening more airport hub locations, and increasing both staff and logistics/systems support.”

Another respondent also noted that, “In the U.S., we are beginning to see a rebound in companies bringing growth back onto the leadership agenda. Over the last six to nine months, attitudes have started to change and behavior is beginning to follow. Once our C-suite leaders and, importantly, their boards accept the growth message and begin to act, we can turn around the past decade’s sluggish economic performance. It is more than past time to reset the agenda.”

Small-company CEOs have the most confidence
When broken down by company size, the ratings for most of the size brackets reflect an about-face from how CEOs in each of those brackets felt in July. CEOs of the smallest companies (revenues less than $10M) had the highest level of confidence in future business conditions, with a rating of 7.14 in August—a marked difference from when they had the lowest level of confidence in July, with a rating of 6.79.

Conversely, CEOs at the largest companies (revenues over $1 billion) were tied with those at lower mid-market companies (revenues between $10M and $99.9M) for the lowest rating in August, at 6.95—the opposite for the sentiment in July, when those two sectors were close to the highest, at 7.00 and 7.02, respectively. The sentiment of CEOs at upper middle-market companies (revenues between $100M and $1B), was flat month over month, with an August rating of 7.07, compared to 7.06 in July.

CEOs in 3 sectors anticipate significant improvements
Continuing a trend that started in July, CEOs in Transportation (Air/Rail), Energy/Utility and Advertising/Marketing/PR/Media/Entertainment had significantly improved outlooks for future business (12 months from now), compared to the future outlook rating they gave seven months ago, in January. The latter sector posted the greatest rating increase, up 19%, from 6.25 in January, to 6.00 in August.

CEOs in the 8 remaining sectors reported lower sentiments in August than they did at the beginning of the year—with the greatest drop coming from the Government/Nonprofit and Pharmaceuticals/Medical Products sectors—both registering a 25% decrease in ratings from January to August.


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