A recent study of CEO opinion on the economy conducted on a monthly basis found a weak present coupled with expectations of an improving immediate future. That analysis is seconded by a second study done quarterly. The Conference Board was responsible for the quarterly study.
Par in the CB standard of measurement is 50. CEO confidence in current business conditions is well below that at 32, but that number is in stark contrast to the assessment they produced six months ago, which was a flat, ugly, round zero.
Asked to look ahead six months into the immediate future, this group of CEOs (about 100) actually went into positive territory with a confidence level of 55, up from 17 in Q1.
Overall confidence was also at 55 for Q2, up from 30 last quarter.
46% are looking for increased profitability over the next 12 months. If there is a weakness in that number, it is because 56% of the CEOs in the group expecting increases think they’ll get there by reducing costs, compared to only 33% expecting demand to pick up. The remainder believes utilizing new technology or raising prices will be the key factor.
“CEOs are considerably more optimistic than last time about the short-term outlook, however, their assessment of current conditions, while also improved, suggests the economy remains weak,” says Lynn Franco, Director of The Conference Board Consumer Research Center. “Among those expecting an increase in profits over the next year, the majority see cost reductions as the primary driver.”
The Chief Executive Magazine study that came out just before this one also cited weakness in the current business climate with cause for at least cautious optimism in the near future. It’s most pessimistic observations were in the area of employment, which was expected to continue to diminish. While not directly covered in the CB survey, it would probably fall into the category of reduced expenses as a route to profitability.
RBR/TVBR observation: A lot of prognosticators have been saying there will be improvement in the second half of 2009. We’ve been hopeful, but also taking such predictions with a 50-pound bag of salt. But CEOs have access to the books, and two surveys in a row predicting better things soon is definitely nice. But beware: CEOs have access to rose-colored glasses just like everybody else.