CEO Confidence Surges above Pre-Recession Levels

CEO Confidence Surges above Pre-Recession Levels

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Some of the nation’s largest businesses are casting a bright eye towards sales, investment, and, to a lesser degree, hiring over the next six months, according to the Business Roundtable’s quarterly CEO Economic Outlook survey.

A whopping 92 percent of the 142 companies surveyed said they expected sales to rise, while none projected sales to decline. Additionally, 62 percent plan to pour more money into capital expenditures such as equipment, and 52 percent plan to add workers to their payrolls.  CEOs also predicted GDP would grow by 2.9 percent in 2011—an increase from the 2.5 percent expectation they forecast at the end of 2010. 

The group’s overall confidence index reading climbed to 113 in the first quarter of 2011—the highest point since the group began collecting this data in 2002, and 9 points higher than the previous high of 104 in the first quarter of 2005.

The company leaders’ forecast mirrors eight consecutive months of retail sales gains logged by the Commerce Department, as well as the latest hiring data which show U.S. companies will add 201,000 workers to their payrolls this month, according to new data released today by ADP Employer Services.  But despite CEO optimism, a hiring turnaround could be slow-going considering companies cut nearly 8 million jobs from their payrolls since the economic downturn hit in December 2007. 

The upbeat prognosis on sales and capital spending is due to increased demand and higher GDP projections, which will eventually result hiring, though not immediately in all cases,  said Business Roundtable chairman and Verizon Communications CEO Ivan Seidenberg.  “We have this timing affect, so we keep a steady flow of capital investment, see sales forecasts go up, and as we do that, we’ll start to see hiring,” he said.  

As productivity and demand rise, the only choice left for companies will be to hire and rehire, said the group’s President John Engler, who cited the auto industry as an example.  “I think we’re at the point where productivity can’t run a third shift, rehiring ensues, and companies start adding new shifts.”    But in order for job growth to pick up in any serious volume, GDP projections need to consistently rise into the three-and-a-half percent range or higher, he said. 

“This is very good news in comparison to past surveys, but it’s not sunny, blue sky, soft-breezes, and smooth sailing a head.  There are still lots of things to worry about.”  Some of those concerns include the threat of a government shutdown, which both Seidenberg and Engler said could seriously derail company operations, as well unrest in the Middle East and Japan which could signal future business disruptions.

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