CEO Confidence Index Drops Five Points; Survey Indicates Guarded, but Favorable View of Economy
SAN DIEGO (June 6, 2007) — Despite a slowing economy and record-high gas prices, chief executives of small- and mid-sized businesses remain more optimistic than might have been expected, according to the Vistage CEO Confidence Index, a quarterly measure of economic, market, and industry trends.
However, the Vistage CEO Confidence Index dropped to 90.5 in Q2, down from 95.4 in the prior quarter and 97.8 a year ago. The slowing economy accounts for the drop in CEO confidence and most expect the economy to remain the same in the year ahead.
The most important factor for CEOs in 2007 is recruiting and retaining talent. As companies across the board step up hiring, competition for skilled workers has increased. One-third of firms cite staffing as their top concern, far outstripping other issues, including cash flow, the economy, growth, and healthcare, and just 1-in-10 CEOs think it will become easier to find qualified employees.
“Executive outlook in Q2 emphasizes the general confidence in the U.S. economy that we’ve seen in the last year,” says Richard Curtin, Ph.D., a consultant for the Vistage CEO Confidence Index and director of consumer surveys at the University of Michigan at Ann Arbor. “Although CEOs remain cautious about their prediction, they are planning for growth and expansion.”
Additionally, CEOs are turning their attention to strategies and programs designed to curtail the effect of rising energy prices by implementing energy saving programs. Firms are conserving energy in all aspects of their operations, from the factory floor to the front office. Product design and delivery are also key areas for reinvention and savings.
"CEOs increasingly cite their environmental effect as a concern, but they’re finding ways to incorporate programs that ultimately boost their bottom line,” says Dan Barnett, chief operating officer, Vistage International. “Green initiatives have become an important investment for companies around the world.”
Slower Economic Growth
Although CEO confidence in the U.S. economy dropped slightly in Q2, the majority of firms expect the pace of economic growth to remain largely unchanged in the year ahead. The expected pace of economic growth has slowed as the overall expansion has lengthened, with the current expansion now the fifth longest on record.
Human Talent Top Priority
Once again, finding, hiring and retaining qualified staff was cited as the most critical challenge for more than one-third of all firms.
Green Initiatives Gaining Support
In 2007, the majority of CEOs (52 percent) are incorporating environmental initiatives into their businesses and an additional 15 percent have plans to do so. Largely focusing on efficiencies and waste management, CEOs also will redesign their products to reduce their environmental footprint and award contracts to green vendors.
Restrained Revenue and Profit Growth
Steady increases in revenues and profits continue into the second half of 2007. As economic conditions improve, CEOs are tentatively raising prices; just 14 percent anticipated a decline in their profits. Seventy-two percent of firms expect increased revenues, down from 75 percent in Q1 and 78 percent a year ago. Nonetheless, nearly 6-in-10 firms expect increased profitability.
Cautious Increase in Investment Plans
Almost half of all U.S. firms (46 percent) plan to increase investments in plants and equipment in Q2, compared to 48 percent in Q1. Higher capital, energy and labor costs and smaller increases in the prices firms could charge for their products or services restrained investments.
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About the Vistage Confidence Index
U.S. small and mid-sized businesses represent the most vital component of the nation's economy. This sector creates 75 percent of all new jobs and generates 50 percent of all national revenue. The opinions of these business leaders provide a clear snapshot of current economic, market and industry trends and demonstrate their plans for growth over the next 12 months. These insights provide a leading indicator for employment, capital expenditure, sales and revenue trends.
The Q2 2007 Vistage CEO Confidence Index is a compilation of responses from 2,118 CEOs of small- to mid-sized companies, surveyed May 15-24, 2007, with a margin of error of 1.9 percentage points. The Vistage CEO Confidence Index is the only comprehensive report of their opinions and projections.
about Vistage International
Vistage International and its affiliates have 14,000 members in 16 countries representing the world’s leading chief executive organization based on revenue. Vistage members generate nearly $300 billion in annual revenue and have more than 2.1 million employees around the world. Vistage is dedicated to increasing the effectiveness and enhancing the lives of chief executives. Member companies are better run and grow their revenues, on average, at twice the percentage growth rate after joining Vistage.
Vistage International includes operations in the United States, the United Kingdom, Ireland, China, Mexico, Argentina and the Netherlands. Vistage affiliates include TEC, The Executive Committee and The Executive Connection in the following areas: Florida, Michigan, Wisconsin, Australia, Brazil, Canada, Chile, Germany, Malaysia, New Zealand, Singapore and South Africa.
media contact:
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Arment Dietrich, Inc.
312.787.7249
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Tony Vignieri
Vistage International
858.509.5882
tony.vignieri@vistage.com