Wall Street Journal/Vistage Small Business CEO Survey: Slight increase in economic optimism

CEOs from U.S.-based small firms reported a slight increase in economic optimism in the November 2017 edition of the Wall Street Journal/Small Business CEO Survey.

The survey, which had 726 respondents, measured the WSJ/Vistage Small Business CEO Confidence Index at 112.5. Comparatively, the index measured 110.0 one month ago and 102.4 one year ago. This recent increase was likely trigged by GDP growth, said Dr. Richard Curtin of the University of Michigan, who analyzed the survey results.

“While the recent movement on Trump’s tax reforms has contributed to the perception that the administration has improved business prospects, it is likely that two consecutive quarters of 3% GDP growth played the more decisive role,” said Curtin. “However, annualized gains in confidence among small firms will increasingly depend on continued accomplishment going forward, rather than the just the expectation of future improvement.”

Other key findings from the November 2017 survey include the following.

CEOs speculate that economic growth will slow in 2018

Has the U.S. economy improved in the last year? Most CEOs (57%) in the November 2017 survey said yes, while 37% of CEOs said the economy had stayed the same and 5% thought that it had worsened. By comparison, in the January 2017 survey, 47% of CEOs reported that the economy had improved. “This reflects the strong performance of the economy in the 2nd and 3rd quarters,” remarked Curtin.

However, expectations for future economic growth were less optimistic. Only 37% of CEOs thought that the economy would improve in the year ahead — compared to 60% in January — and 49% expected that economic conditions would stay the same. Thirteen percent of CEOs said they expected conditions to worsen. “This suggests that CEOs do not anticipate the favorable growth rates in 2017 to be higher in 2018,” said Dr. Curtin.

Small firms expect revenues and profits to remain robust

CEOs continued to report positive expectations for their financial prospects in the November 2017 survey.

About 78% of small firms said they expected higher revenues in the year ahead, similar to the five-year peak of 83% recorded three months ago.

Similarly, 64% of firms expected that their profits would increase, a figure that nearly reaches the five-year peak of 65% recorded three months ago.

Plans to increase hiring and investment expenditures

Other results from the survey indicate that small firms are planning for continued expansion in the year ahead.

For example, 49% of firms said that they are planning to spend more on fixed business investments, while 61% said they expect to increase the total number of employees in their firms. The latter figure is just below the peak of 64% recorded a few months ago.

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