“When asked about future prospects for the economy, 58% of CEOS in our fourth quarter survey expected improvement during the year ahead compared with just 5% expecting any further declines. This was the most favorable outlook for economic growth since the start of 2004.” –from the Vistage International quarterly CEO confidence index survey
While the numbers remain mixed (housing prices dropping, job openings rising), there seems to be a growing amount of confidence in many corners that the U.S. economy is getting better and better – so much so that many CEOs, apparently, think revenues and profits are poised to do very well in 2011.
This comes from the most recent “confidence index” survey compiled on a quarterly basis by Vistage International that polls nearly 2,000 small business CEOs concerning their feelings about the economy.
Vistage said its CEO confidence Index jumped to 106.3 in the fourth quarter last year from 95.1 in the third quarter, 94.4 in the second quarter and 93.7 in the first quarter of 2010. Of the 1,729 respondents in the fourth quarter survey, some 77% expect increased revenues and 63% foresee higher profits for their firms this year – with 54% expecting to hire more employees in 2011, which is the first time in three years that the majority of CEOs planned to expand the number of jobs.
While CEO confidence had been rising incrementally for seven consecutive quarters, the fourth quarter surge was due in large part to the reduction of economic and political uncertainties following the mid-term elections and a belief that these CEOs' companies are well positioned for the future, said Rafael Pastor, Vistage’s chairman and CEO
[You can watch him expound on the survey findings a little more in the clip below.]
Vistage’s nationwide survey – conducted December 14 thru 24 last year – is managed by the University of Michigan's Dr. Richard Curtin, who’s been in charge of it since Vistage began taking this quarterly poll in 2003.
Another big finding is that most of the CEOs polled expected the U.S. economic recovery to significantly accelerate this year – and this “turnaround in confidence,” Vistage’s Pastor (at right) noted, “is very significant. At the depths of the recession in late 2008, 97% of all CEOs judged economic conditions were in decline; in late 2010, just 7% reported continued declines.
When asked about future prospects for the economy, he noted 58% of the CEOs surveyed in the fourth quarter 2010 survey expected improvement during the year ahead compared with just 5% expecting any further declines – the most favorable outlook for economic growth since the start of 2004, Pastor stressed.
OK, though: this is a measure of confidence here; not what we’d call “real” numbers – meaning that while we can say things are getting better, that doesn’t necessarily mean that they are.
Still, business confidence plays a critical role in any recovery – especially where trucking is concerned. Look at what’s happening in terms of Class 8 orders at the moment: FTR Associates reported that total net orders for all major North American OEM’s hit 25,247 units last December; only a slight 3% drop from November’s stronger-than-expected activity.
Net Class 8 order activity for the final quarter of 2010 translates into annual new Class 8 truck demand of 280,324 units for the U.S., Canada, Mexico and export – a pretty healthy level, considering how freight demand leveled off at the end of last year.
Still, that level of orders is spurring optimism in the mnids of many analysts monitoring the trucking space. Eric Starks (at left), FTR’s president, told me this week that order activity for December came in on the high side of his firm’s expectations, supporting its outlook hat production and sales of Class 8 trucks will continue to accelerate during 2011.
“While what we’re seeing in Class 8 orders and from broader economic numbers doesn’t necessarily change our outlook, it’s creating a lot more upside potential,” he told me. “Originally our outlook was for 3% GDP [gross domestic product] growth in 2011. Now we see a strong potential for 4% GDP growth – and a one percentage point improvement is a really big deal.”
Other firms are also getting more positive readings from their surveys as well. The Chicago-based nonprofit Turnaround Management Association (TMA) conducted its annual “Trend Watch” survey at the end of 2010 and found its members now have a more positive outlook on the direction of the U.S. economy – albeit an outlook that is far from rosy.
TMA said this “brighter economic picture” remains clouded by uncertainty from a commercial real estate industry paralyzed by too much debt and from a public sector where state and local governments are wrestling with reduced tax revenues and onerous pension obligations.
“I haven't seen any economist who predicted back in 2008 that there was going to be a U-turn and the economy was going to come roaring back,” said Thomas Henderson, a bankruptcy attorney in Houston, in the TMA poll. “These things are like turning around an ocean liner.”
Still, opinion was tied at 31% among those who think the worst of the economic crisis is over and those who expect to see improvement in 2011. Also tied, however, at just under 20% of responses are those who suspect the worst is yet to come and those who don't expect to see substantial economic improvement until 2012.
An undercurrent of caution is revealed in responses identifying where businesses plan to spend cash reserves after notable gains in 2010. More than one-third of respondents (35%) said companies will engage in mergers and acquisitions, while 31% said those funds will go untouched. Only 2% of respondents think companies will increase personnel, while nearly three in 10 think businesses will increase productivity without increasing employees. Only 7% of respondents to TMA’s survey think companies will commit to capital spending.
“The panic - or debacle - that we were in during the Great Recession of 2009 and 2008 seems to be subsiding but people are very cautious,” said William Lenhart, a certified turnaround professional (CTP) and partner with BDO Consulting in New York. “Businesses are looking at opportunistic buys; otherwise, they're just sitting on the sidelines.”
In any event, despite some of the obvious negatives – such as a residential housing market that remains awash in foreclosures and burdened with inventory – more confident feelings seem to be abounding in the business community. That at least is a positive factor worth keeping tabs upon as the New Year begins to stretch its legs.
