CEO Confidence Improves in Second Quarter
Each quarter the Conference Board conducts a confidence survey of about 100 business leaders across a wide range of industries.
The Conference Board Measure of CEO Confidence, which had increased in the first quarter of 2009, increased dramatically in the second quarter. The Measure improved to 55, up from 30 last quarter (FYI - a reading of more than 50 points reflects more positive than negative responses).
“CEOs are considerably more optimistic than last time about the short-term outlook, however, their assessment of current conditions, while also improved, suggests the economy remains weak,” says Lynn Franco, Director of The Conference Board Consumer Research Center. “Among those expecting an increase in profits over the next year, the majority see cost reductions as the primary driver.”
CEOs’ assessment of current economic conditions was considerably less pessimistic. Now, 32 percent claim conditions have improved compared to six months ago, up from zero percent last quarter. In assessing their own industries, business leaders were also much less negative. Now, 24 percent claim conditions are better, up from just one percent in the first quarter.
Looking ahead six months, CEOs are much more optimistic. Nearly 55 percent of business leaders expect economic conditions to improve in the next six months, up from approximately 17 percent last quarter. Expectations for their own industries were also more optimistic, with 45 percent of CEOs anticipating an improvement in the months ahead, up from 26 percent last quarter.
On the issue of profit expectations over the next 12 months, 46 percent of executives anticipate increases. Executives engaged in the durable goods industry are the most optimistic, with 77 percent expecting profits to increase. Executives in the non-durable goods industry are second, with 64 percent anticipating a rise in profits.
Among chief executive officers who expect profits to increase, 56 percent believe cost reductions will drive profits up, while 33 percent cite market/demand growth as the main source of improvement. Only 7 percent cite new technology as a driver of growth and the remaining 4 percent cite price increases.
Regardless of your industry or geography, as the “Great Recession” has unfolded we’ve all had a front-row seat to witness the carnage. While this survey does not indicate we are completely in the clear it is one of many signals that we are starting to emerge.
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