Conference Board Says CEO Business Confidence Retreats
Monday, July 15, 2002
July 15, 2002 -- Chief executives' confidence in the nation's economy retreated in the second quarter of 2002 after climbing to a nine-year high in the first quarter, The Conference Board reports today. The Conference Board's Measure of Business Confidence now stands at 61 after hitting 66 in the first quarter (a reading of more than 50 points reflects more positive than negative responses). The Measure of Business Confidence is based on quarterly surveys of more than 100 chief executives representing a wide variety of U.S. industries. "Executives continue to rate current economic conditions favorably, but they are more cautious looking ahead," says Lynn Franco, Director of The Conference Board's Consumer Research Center. "Despite growing concern about recent corporate scandals, CEOs' profit expectations are still optimistic for the year ahead." Chief executives' short-term outlook for the economy is less optimistic than last quarter. Seventy-one percent anticipate an improvement in economic conditions in the coming months, down from nearly 80 percent in the first quarter of this year. In assessing conditions in their respective industries, approximately 61 percent of business leaders expect an improvement, down from about 65 percent. About 7 percent expect conditions to worsen, up from 5 percent in the prior survey. The percent of business executives who say conditions are better now than they were six months ago rose from approximately 50 percent to nearly 62 percent. Those claiming conditions have deteriorated declined from 22 percent to 19 percent. In assessing their own industries, 57 percent feel conditions over the past six months have improved, compared to 36 percent in the first quarter. Those holding the opposite view declined from about 33 percent to 14 percent. Profits are Projected to Increase On the issue of profit expectations over the next twelve months, nearly 70 percent of executives anticipate increases. However, there are differences by category of business. About 75 percent of executives in the manufacturing industry are optimistic, while only 55 percent of service industry executives feel the same. Among executives who expect profits to be higher, 44 percent cite cost reductions and an additional 43 percent cite an increase in market/demand growth as the main sources of improvement. The remaining 13 percent say a rise in profits will occur as the result of price increases and new technology.