Vistage Confidence Index: CEOs maintain optimism

The Vistage CEO Confidence Index was nearly equal during the second and third quarters of 2017, suggesting that optimism among small business CEOs has stabilized.

The index, calculated as part of Vistage’s quarterly survey of small business CEOs, measured 103.0 in the second quarter and 103.1 in the third quarter of 2017. By comparison, the index measured 106.9 at the start of the year (Q1 2017) and 91.4 one year ago (Q3 2016).

There are several variables that factor into the index, including CEO opinions on current economic conditions, expected economic conditions, expected change in employment, planned fixed investments, expected revenue growth and expected profit growth. CEOs expressed different degrees of optimism on these issues.

“Offsetting the expected moderation in the pace of growth in the economy, firms nonetheless anticipated somewhat stronger growth in their revenues and profits,” said Dr. Richard Curtin of the University of Michigan in his analysis of the results. “Importantly, planned investments and the expansion of employment remained at very high levels throughout the year.”

Results from the Q3 survey revealed other important findings about the current state of small businesses and outlook of small business CEOs. They include the following.

Fewer CEOs anticipate economic growth

The majority of small business CEOs (52 percent) believe that the economy has recently improved, which is slightly below last quarter (55 percent) but nearly twice as much as one year ago (25 percent).

Looking ahead, however, only 32 percent of CEOs said that they expected the pace of growth to improve next year—a moderate decrease from last quarter (38 percent) and significant decrease from last year (58 percent).

“Although uncertainty about eventual passage of new economic policies remains a top concern, small firms now believe that they can profitably cope with the continuation of modest economic growth,” said Curtin.

Small businesses report robust sales and revenue growth

It’s been a good year for small business sales. About one-third of small businesses said that their revenues had grown 10 percent or more in last fiscal year, while 40 percent reported growth rates of 1-10 percent. Only 15 percent reported flat revenues, and 11 percent of firms said their sales had declined.

Looking ahead, 36 percent of small businesses said they expected revenue gains of 10 percent or more. Forty-eight percent of firms said they expected gains between 1-10 percent. Only 11 percent of firms expected revenues to remain unchanged, while 6 percent said they expected revenue to decline. Overall, 77 percent of firms said that revenues are likely to increase in the year ahead.

At the same time, profit expectations were largely unchanged compared to previous quarters. About 62 percent of small businesses said they expected higher profits this quarter, which is consistent with the 60-64 percent range reported in the last four quarters.

Investment plans and hiring plans remain strong

CEOs are sticking with their plans to hire more employees and increase their investment spending.

Forty-seven percent of CEOs said that they intended to increase their plant and equipment investments, a figure consistent with the 47-48 percent range from the last four quarters. Similarly, 62 percent of CEOs said that they planned to increase the size of their workforce. Again, this was consistent with the 60-62 percent range reported in the last four quarters.

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