After precipitous declines during the prior two quarters, CEO confidence bounced back at year’s end with the largest quarterly gain since the start of the recovery in 2009, according to the Vistage CEO Confidence Index. This is the latest of a handful of reports from various sources showing a growing, if still wobbly optimism that the U.S. economy may be emerging from the doldrums.
The Vistage CEO Confidence Index was 98.8 in the 4th quarter 2011 survey, up from 83.5 in the 3rd quarter, and reaching the highest level since 105.2 was recorded at the start of 2011. The Q4 2011 Vistage CEO Confidence Index reflects responses from 1,641 U.S. CEOs, surveyed between Dec. 12 and Dec. 22, 2011.
Every component of the confidence index improved. Expected gains prompted CEOs to plan increases in employment and fixed investments, as they anticipate higher revenues and profits during the year ahead.
Persistent economic and political uncertainty remains a top concern, mentioned by nearly half of all CEOs, fueled by the debt crisis in Europe and the failure of Congress to address the national debt, with two-thirds saying that the national debt had negatively affected their business plans.
The recent surge in confidence may have longer-term implications, as 49% of the CEOs surveyed believe that in three years, the U.S. will be the most improved economy in the world with China posting 17% and South America at 14%.
According to Vistage Chairman of the Board and CEO Rafael Pastor, the three-year outlook is very telling and good news for our economy: “This is not the opinion of pundits or economists; these are the CEOs who are leading our economic recovery and will be responsible for improving the business and employment picture in the U.S. over the next three years.
This is a good sign of better days ahead. Basically, these CEOs are saying that, despite the stalemates in Washington, and the volatility around the world, they and their enterprises will innovate, grow, and hire in the ways the rest of the world can’t.”
Here’s a video on the survey findings:
Economic Growth Rebounds. More than twice as many CEOs thought that the economy had improved in the latest survey compared with one quarter ago. Improved economic conditions were cited by 41% in the 4th quarter, up from just 18% in the 3rd quarter. Just 12% thought the economy had recently worsened. When asked about prospects for the year ahead, additional economic gains were expected by 40%, twice the 20% recorded in the 3rd quarter. While CEOs were still less optimistic than they were in the closing quarter of 2010, the data signal a stronger 4th quarter GDP and modest positive growth in the year ahead.
Majority Plan New Hires. Net increases in employment were planned by 55% of all firms in the 4th quarter of 2011. Although only barely above last year’s 54%, it was the highest percent that planned job additions since 2007.
Just 6% planned net declines in the number of their employees during 2012, scarcely above the all-time low of 5%. CEOs were nearly evenly split on whether the recent sharp decline in unemployment represented the start of a sustained trend or just a temporary blip.
When asked what Congress should do to create more jobs, 33% of the CEOs said “make the current tax cuts permanent,” followed by, “provide employers with hiring incentives,” at 17% and “increase spending on infrastructure” at 14%.
Revenue Prospects Improve. Revenue growth was expected by 73% of all firms in the 4th quarter survey, up from 62% in the prior quarter, and much closer to the year ago level of 77%. Revenue expectations were twice as favorable as at the recession low, when just 36% expected higher revenues in the closing quarter of 2008. This recent improvement came despite the expectation by six-in-ten firms that the prices that they would receive for their goods or services would remain unchanged or fall during the year ahead.
Profit Outlook Edges Higher. Increasing profits were anticipated by 55% of all firms in the 4th quarter of 2011, between last quarter’s 47% and last year’s 63%. While the worst impact of the recession on profits is clearly over (just 9% anticipated declining profits, down from a peak of 36% three years ago), the expectation of higher profits is still well below the peak of 74% in the 4th quarter of 2003.
Investment Strengthens. Planned investments in new plant and equipment were reported by 42% of all firms in the 4th quarter of 2011, the highest level since 48% was recorded at the start of 2011. Just one-in-eight firms reported that they would reduce their fixed investments during 2012. While the number of firms that plan to increase investment spending is well above the low of 18% recorded at the close of 2008, it is still below its peak level of 57% set at the closing quarter of 2005. This commitment of investment funds to secure future revenues underscores these CEOs’ expectations of a modestly stronger recovery in 2012.
Social Media. 60% of Vistage CEOs reported using social media to grow their businesses. When asked on which social media platform they are most personally active, 41% stated LinkedIn and 26% answered Facebook.
Presidential Politics. When asked which Republican candidate for President will emerge as the 2012 party nominee, Mitt Romney led the pack with 49% followed by Newt Gingrich at 29%, and “unsure” at 18%. None of the other candidates registered at higher than 2%.
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