Growing Uncertainties Stall Small Business CEO Confidence According to the Latest Vistage CEO Confidence Index

SAN DIEGO, April 5, 2011 /PRNewswire/ -- Two-thirds of all CEOs surveyed believe the economy has improved during the past year and half expect further gains during the year ahead. The Vistage CEO Confidence Index was 105.2 in the 1st quarter of 2011, slightly below 106.3 recorded in the prior quarter but well above the 93.7 in last year's 1st quarter survey. CEO confidence has more than doubled since the recession low of 48.7 two years ago. However, the small decline reflects a renewed uncertainty about the impact of events in Japan and the Middle East on energy costs, consumer spending and inflation.  Overall, the majority of CEOs still expect the recovery to continue and their own businesses to continue to grow.

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Nearly three-quarters of CEOs said rising gas prices will have an adverse impact on their businesses; 38% are already seeing evidence that these increases are cutting into consumer spending. Nearly half  (49%) of the CEOS said they expect their prices for products or services to increase during the next 12 months; only 39% had such an expectation just a quarter ago.  

Survey respondents (53%) also said that the top priority for Congress should be lowering the deficit, eclipsing issues such as job creation (22%), tax policy (11%) or reducing federal regulations (10%).  

According to Vistage International Chairman of the Board and CEO Rafael Pastor, the Q1 results reflect continued optimism among our nation's small business CEOs.  "Uncertainty is the enemy of confidence," Pastor said.  "While the events taking place around the world have created new uncertainties about energy costs, consumer spending and inflation, it's remarkable that CEOs remain as optimistic as they are about increasing sales and profits and creating jobs throughout the remainder of the year."

The nationwide survey was conducted from March 15 – 25, 2011. The Index is directed by Dr. Richard Curtin, Research Professor at the University of Michigan and the Director of the Consumer Sentiment Surveys at the Institute of Social Research.  He has directed the Vistage CEO Confidence Index Survey since its inception in 2003.  Dr. Curtin provided the following analysis of the first quarter 2011 results:  

Slower Recovery Expected. Current economic conditions had improved according to 63% of all CEOs in the 1st quarter, up from 48% one year ago and just 2% two years ago. Only 5% thought that the economy had worsened - the lowest percentage in six years. When asked about prospects for the year ahead, 50% expected the economy to continue to improve, down from 59% last quarter, but still above all other prior quarters since the start of 2005. Most of the shift was toward the expectation that the pace of economic growth would remain unchanged, as just 7% of all CEOs anticipated a worsening economy.

Investment Plans Improve. Planned investments in new plant and equipment continued to grow in the 1st quarter 2011 survey. Indeed, more firms planned additional investments in their productive capacity than at any time during the past five years. Among all firms, 48% planned to increase their investment spending, up from 34% one year ago and more than twice the 22% recorded at the start of 2009. Just 8% of firms expected to reduce their fixed investments in 2011, down from 44% at the end of 2008. Importantly, one-third of all firms reported that credit was still hard to obtain. Moreover, nearly half of all CEOs said that improving access to capital was the best way for the government to foster new job creation.

More Jobs Creation Ahead. Net increases in employment were planned by 54% of all firms in the 1st quarter, exactly the same positive job creation plans reported in the prior quarter. Indeed, more firms planned on adding employees in the past two quarters than at any other time in the past four years. Just one-in-twenty firms expected to trim their workforce. Interestingly, six-in-ten firms said that it was difficult to find new employees with the right skills.

Revenue Prospects Positive. Revenue growth was expected by 76% of all firms in the 1st quarter survey, barely changed from the 77% in the prior quarter, but well ahead of last year's 64% or the 40% recorded two years ago. Just 5% anticipated declines in revenues in the past two quarters, the lowest proportion in five years.

Profit Outlook Favorable. Increasing profits were anticipated by 57% of all firms, between the 63% in 4th quarter 2010 and the 52% that expected rising profits in last year's 1st quarter survey. Aside from last quarter's five year peak, more firms expected increasing profits in the 1st quarter than any time since early 2007.

about the Vistage CEO Confidence Index

The quarterly Vistage CEO Confidence Index, established in 2003, is the nation's largest and most comprehensive report of the opinions and projections of small- to medium-sized business CEOs about the U.S. economy.   The Q1 2011 Vistage CEO Confidence Index includes responses from 1,728 US CEOs, surveyed between March 15 and March 25, 2011, with a margin of error of 1.6 percentage points.  Since its establishment in 2003, the Index has proven to be a leading indicator for changes in GDP and Employment, two to three quarters hence.  

about Vistage International

Founded in 1957, Vistage International, Inc., headquartered in San Diego, California, is the world's leading chief executive organization, serving more than 14,000 members in 15 countries.  Vistage member CEOs participate in Chair-led advisory board peer groups, receive one-to-one coaching, learn from expert speakers, and interact among a global network of CEOs from a broad range of industries.  

SOURCE Vistage International, Inc.