Vistage CEO Confidence Index Dips, Repeating 2011 Pattern of Q2 Decline

SAN DIEGO, July 2, 2012 /PRNewswire/ -- CEOs have become less optimistic about prospects for their firm due to renewed concerns about the outlook for the national economy. 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). 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).

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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.

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 Chairman of the Board and CEO, Rafael Pastor stated: "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."

Slower Economic Expansion Expected. Renewed concerns with the current economic conditions as well as future prospects were responsible for the majority of the retreat in optimism. The proportion of CEOs who reported that the economy had recently improved fell by 24 percentage points from last quarter, and the proportion who expected the economy to improve during the year ahead fell by 19 percentage points. It was nonetheless true that CEOs held favorable rather than unfavorable views on the economy by nearly a two-to-one margin in the Q2 2012 survey. Views on the economy during the past year have been more volatile than the underlying performance of the economy. This reflects an unusual degree of unsettled opinion about the economy and the potential direction of economic and health care policies.

Revenue Prospects Remain Strong. Revenue growth was expected by 66% of all firms in the Q2 2012 survey, just below the 75% in the prior quarter and last year's 68%. This anticipated growth in revenues stems mostly from increased sales and cost cutting rather than increases in the prices charged for products or services. Just 35% anticipated increases in prices during the year ahead, about half as many as expected increased revenues, and down from 42% that expected price increases last quarter.

Majority Expect Higher Profits. Higher profits were anticipated by 53% of all firms in the 2nd quarter, between the prior quarter's 60% and last year's 50%. Slower economic growth has diminished profit expectations. Growth in profits was expected by 55% of all firms during the past two years, down from a peak of 74% when the economy was booming in 2004. The shift in prospects has caused firms to place greater emphasis on cost reductions and productivity gains as well as expanding their customer base.

Hiring Plans Remain Favorable. Half of all firms planned net increases in the number of people they employed in the Q2 survey. Although this was below last quarter's 57%, most firms planned to maintain their employment levels. Just 8% of all CEOs anticipated a net decline in the number of their employees, barely above last quarter's 5%. Indeed, one-in-six firms said they faced a significant challenge in finding and retaining qualified employees.

Positive Investment Plans. Total fixed investment expenditures remained largely unchanged at improved levels in the latest survey. New investments were planned by 40% in the 2nd quarter of 2012, just below the 45% recorded last quarter and last year's 42%. The continued commitment to invest underscores their positive outlook for a sustainable, albeit slower, expansion of their business.

About Vistage International

Founded in 1957, Vistage International, Inc., headquartered in San Diego, California, is the world's leading peer advisory membership organization, serving 16,000 CEOs and senior level executives in 15 countries.

SOURCE Vistage International