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The Conference Board Measure of CEO Confidence, which had increased to prerecession highs in the first quarter, declined in the second quarter of 2017. The Measure now reads 61, down from 68 in the first quarter (a reading of more than 50 points reflects more positive than negative responses).
“CEO Confidence declined in Q2, but sentiment about the overall economy remains positive,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “CEOs are optimistic about the growth prospects for both mature and emerging economies, but expectations for Brazil have shifted from positive to neutral. Seven out of ten CEOs expect profits will increase over the coming year, with market/demand growth and cost reductions the major driving forces.”
CEOs’ appraisal of current economic conditions waned, with 60% saying conditions were better compared to six months ago, down from 71% in the first quarter. Business leaders were also less positive in their appraisal of current conditions in their own industries. Now, just 47% say conditions in their own industries have improved, down from 60% last quarter.
Looking ahead, CEOs’ optimism regarding the short-term outlook for the economy moderated due to a greater percentage expressing a “more of the same” sentiment as opposed to foreseeing conditions worsening. Currently, 41 percent expect economic conditions to improve over the next six months, compared to approximately 65% last quarter. The outlook for their own industries was also less favorable, with 48% of CEOs anticipating an improvement over the next six months, down from 67% in the first quarter of this year.
CEOs’ assessment of current conditions for the United States declined from the enthusiasm seen in the first quarter, but still leads globally with sentiment now slightly above that expressed for Europe. CEOs’ assessment of current conditions remains slightly positive for India, China, and Japan, but sentiment for Brazil has turned slightly negative.
Looking ahead, CEOs’ short-term expectations for the United States remain positive, but are more subdued than earlier in the year. Expectations for Europe improved, while sentiment regarding China and Japan was unchanged. Expectations for India were only slightly less positive, while the outlook for Brazil has shifted from positive to neutral.
Profit Expectations for 2017 Remain Optimistic
CEOs are optimistic about profit expectations for the next twelve months, with about 71% expecting profits to increase, compared to 75% last year. Executives in the services industries are the most optimistic, with about 75% expecting profits to increase. About seven out of ten CEOs in the nondurables and six out of ten CEOs in the durables industries expect an increase in profits.
Among chief executive officers who expect profits to rise, 53% say market/demand growth will be the primary driving force, while 29% cite cost reductions. New technology is cited by 18% of CEOs, while none of the CEOs surveyed said price increases would be the primary source of improvement in profits.
About The Conference Board
The Conference Board is a global, independent business membershipand research association working in the public interest. Our mission is unique: To provide the world’s leading organizationswith the practical knowledge they need to improve their performance and better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States.