CEO Confidence Is More Positive So Far, But Future Remains Uncertain

CEO business confidence improves in first quarter of 2007, but future predictions are mixed, according to Conference Board's survey.

The Chief Executives' Confidence Measure increased to 53 for the first quarter of 2007, from 50 in the last quarter of 2006, according to the Conference Board's survey of CEOs released Monday.

A reading of more than 50 points indicates more positive than negative responses.

The survey of about 100 business leaders in a wide range of industries, shows that  twenty-four percent of CEOs believe the current economic environment is better, the same as last quarter.

When assessing their own industries, business leaders were a bit more positive than last quarter with about 37 percent answering that conditions are better, up from nearly 23 percent last quarter.

"The improvement in CEO confidence this quarter is due primarily to a decline in the number of pessimists, not an increase in the number of optimists," says Lynn Franco, Director of The Conference Board Consumer Research Center. "The good news is that business leaders do not expect conditions to worsen. But by the same token, they do not expect conditions to improve."

Optimism for the short-term outlook was mixed, though, among the CEOs. Almost 27 percent of business leaders are hopeful that economic conditions will improve in the next six months, down from 29 percent last quarter.

And the number of CEOs expecting conditions to deteriorate dropped to 15 percent from 27 percent in the last survey. Expectations for their own industries were also more upbeat, with 35 percent expecting an improvement, up from 33 percent last quarter.

As for unemployment, approximately 42 percent of CEOs forecast an increase in employment levels in their industry, down from about 46 percent a year ago. The proportion of CEOs who expect a decline increased to 32 percent from about 24 percent last year.

Health care costs are still the major stumbling block to hiring new workers, while wage and salary costs came in second. Regulation and litigation costs and other fringe benefits did seem to be as much of a concern to business leaders when hiring new workers.