CEOs have become less optimistic about prospects for their firm due to renewed concerns about the outlook for the national economy.
While the CEOs expect slower economic expansion, they say revenue prospects remains strong. The majority expect higher profits and hiring plans remain favorable. (See infographic below).
The Vistage CEO Confidence Index was 92.8 in the 2nd quarter 2012 survey, down from 105.1 in the 1st quarter of 2012, repeating the same pattern of decline recorded in the first half of 2011 (105.2 in the 1st quarter of 2011 to 92.9 in the 2nd).
Third mid-year slump in a row
Indeed, this is the third year that a mid-year slump in confidence has been recorded. The common elements in each year’s retreat have been weakening conditions in the economy as well as concerns over economic policies. Despite the retreat in confidence, the Confidence Index is much closer to its ten-year peak (115.6) than to its low point (48.7).
The Survey of 1650 Vistage members, small to mid-sized business CEOs, was conducted between June 16 -22, 2012. The Q2 results mark the beginning of the second decade of a survey that many regard as a reliable predictor of U.S. GDP and Employment.
How to solve economic issues?
In Q1, CEOs identified the national deficit, entitlements and health care as the top priorities for the next administration. In the Q2 survey, they offered guidance for solutions to these important issues.
To reduce the deficit/debt, 42% stated it will take a combination of increasing taxes, cutting spending, and reforming entitlements, followed by 27% who recommended cutting spending only, while 23% preferred enacting a spending cap.
To control heath care costs, 31% suggested allowing individuals to opt out of mandated health coverage for their own private coverage, while 30% believed Washington should provide incentives to companies to implement wellness programs.
As for entitlement reform, 30% challenged Washington to increase the age by which someone can receive social security.
Commenting on the issues and solutions identified by these CEOs of small to mid-sized businesses, Vistage Chair and CEO, Rafael Pastor said,“Jobs was not identified among the top three priorities because CEOs see it as the government’s role to create the economic conditions so that they can hire more people. As for the solutions, our Vistage member CEOs are not ideologues; they are pragmatists. Regardless of who is leading this country after January 20,, 2013, he would be wise to heed their advice.”
Commenting on the overall survey results, University of Michigan’s Dr. Richard Curtin said, “Overall, the data indicates that firms expect the economic expansion to continue, with the majority anticipating that their firms will book higher revenues and increased profits during the year ahead.
“Nonetheless, firms expressed rising uncertainty about what federal tax and spending reforms will be passed to avoid a nose dive off the 2013 fiscal cliff. It’s too close and too uncertain to avoid taking some steps now to protect their firm’s interests.”