CEOs’ Confidence in Economy Posts Significant Gain

September 9, 2003 : Permanent Link

SAN DIEGO–(BUSINESS WIRE)–Sept. 9, 2003–

Nation’s Business Leaders Share Views on Economic Recovery,

Impact of 9/11 and Military Situation in Iraq in Q3 TEC Confidence

Index

TEC International (http://info.teconline.com), the world’s largest organization of CEOs, today released Q3 results of the TEC Confidence Index, a quarterly survey of chief executives that polls CEOs nationwide on current economic trends and issues affecting today’s small to mid-sized business climate. Overall CEOs’ confidence in the economy grew significantly, as evidenced by the Q3 TEC Confidence Index results, which rose by 8.7 percent when compared to the Q2 results released June 9, 2003.

In the Q3 survey, for which nearly 1,000 CEOs were surveyed during the week of Aug. 25, 2003, the majority holds positive views of current economic conditions and expects the economy to continue to improve in the year ahead. These findings show CEOs plan to invest more in the expansion of their firms as well as hire more employees. In addition to reporting on the country’s current and future economic state, employment plans, capital expenditures, expected revenue and profit growth, the survey addresses issues such as the impact of 9/11, plans for personal investment, support for recall elections and the current military situation in Iraq.

According to Dr. Richard Curtin, index consultant and director of surveys of consumers for the University of Michigan, “The largest gain is the most important: more firms reported that the acceleration in economic growth was already underway, and this improvement was used to justify more aggressive expansion plans. More than eight in ten firms expect revenue growth during the year ahead and seven in ten predict higher profit margins.”

Among all CEOs surveyed in Q3, 51 percent reported they had already noticed renewed strength in the overall economy, up sharply from the 30 percent recorded in the Q2 2003 survey results. “This was the largest positive change of any of the survey measures,” said Curtin. “This recognition of actual gains in the economy was the critical factor behind the increase in hiring and investment plans.”

Similarly, 70 percent of CEOs expect the economy will continue to improve during the next 12 months, up from 67 percent in Q2. “This quarter’s results show that any concerns about a renewed lapse in economic growth have all but disappeared,” said Dan Barnett, chief operating officer of TEC International. “Only four percent believe economic conditions will worsen, which is a definite sign of CEOs’ renewed optimism in the economy.”

With CEOs’ confidence in the economy growing, 51 percent plan to increase their firms’ total investment expenditures during the next 12 months, up from 44 percent last quarter. Regarding hiring plans, 57 percent plan to increase their firms’ total number of employees during the next year, as compared with 52 percent in Q2.

As for CEOs’ predictions for increased profitability in the next year, 70 percent believe their firms’ profitability will improve, up from 65 percent the previous quarter. Much of the gain in profitability was due to increased revenue, which was anticipated by 81 percent of all CEOs surveyed in Q3.

On another positive note, nearly 30 percent of CEOs expect the value of the U.S. dollar will be stronger compared with other currencies over the next 12 months; this is sharply up from Q2 in which only 18 percent believed it would increase in value.

As the anniversary of September 11 approaches, CEOs surveyed reflected on the impact it had on their businesses. Most notably, 70 percent believe the effects are still being felt and have delayed the economic recovery in 2003. Among the CEOs surveyed, 35 percent have reduced spending, 28 percent have delayed expansion, 26 percent have experienced business cancellations, 21 percent have had to cancel travel and 18 percent have had to reduce staff as a direct result of 9/11.

In the wake of the California recall election, 51 percent of all CEOs surveyed feel that recall elections are a useful tool to hold politicians accountable, yet 31 percent believe it is a waste of taxpayers’ money. Regarding next year’s presidential election, 76 percent believe the economy will be the most critical issue; this is slightly down from last quarter in which 82 percent cited the economy as the most critical issue.

With regard to the current military situation in Iraq, only 34 percent of CEOs surveyed believe President Bush is doing a good job leading the peacekeeping efforts in Iraq; this is down from last quarter in which 37 percent felt he was doing a good job leading post-war reconstruction in Iraq. Overall, the majority of CEOs surveyed (37 percent) feel Bush is doing a fair job. Despite the recent bombing of the U.N. headquarters in Baghdad, almost 60 percent of all CEOs surveyed believe the U.S. should not send more troops into Iraq.

The TEC Confidence Index is designed to measure the change in CEOs’ optimism throughout time. The survey methodology is based on the first six component questions, which are scored as the percent giving favorable replies minus the percent unfavorable plus 100. The TEC Confidence Index is the sum of the components calculated as a percentage of the second quarter survey. <pre> TEC Confidence Index Component Questions Q2 2003 Q3 2003 100.0 108.7 Current Economic Conditions 103 138 Expected Economic Conditions 162 166 Expected Change in Employment 141 149 Planned Fixed Investment 132 143 Planned Revenue Growth 168 77 Expected Profit Growth 155 63 2003 USA Q3 TEC Confidence Index Number of respondents: 994 Number of surveys sent: 5124 Response rate: 19% Survey tool: Reciprix Analysis completed: 2-Sep-03 Margin of Error: 3.1% w/ 95% Confidence 4.1% w/ 99% Confidence 1) Compared with a year ago, have overall economic conditions in the U.S. improved, remained about the same, or worsened? Freq. Percent Improved 498 51% About the same 343 35% Worsened 128 13% 2) During the next 12 months, do you expect the overall economic conditions in the U.S. will be better, about the same, or worse than now? Freq. Percent Better 679 70% About the same 250 26% Worse 36 4% 3) Do you expect your firm’s total number of employees will increase, remain about the same, or decrease during the next 12 months? Freq. Percent Increase 547 57% About the same 340 35% Decrease 79 8% 4) Are your firm’s total fixed investment expenditures likely to increase, remain about the same, or decrease during the next 12 months? Freq. Percent Increase 490 51% About the same 392 41% Decrease 81 8% 5) Do you anticipate that your firm’s sales revenues will increase, remain about the same, or decrease for the next 12 months? Freq. Percent Increase 776 81% About the same 141 15% Decrease 43 4% 6) Do you expect your firm’s profitability to improve, remain about the same, or worsen during the next 12 months? Freq. Percent Improve 674 70% About the same 222 23% Worsen 67 7% 7) Do you expect the value of the U.S. dollar compared with other currencies to be stronger, about the same, or weaker during the next 12 months? Freq. Percent Stronger 279 29% About the same 494 52% Weaker 174 18% 8) Where do you personally plan to invest during the next 12 months? Freq. Percent Stocks 499 50% Bonds 131 13% Real estate 465 47% No planned investments 178 18% Other 96 10% Personal Company/Businesses 52 New Businesses 9 Funds / Bonds 11 Equipment 3 Hedge Funds 3 Gold 3 Retirement 2 Oil / Gas 2 CDs 2 Miscellaneous 9 9) On average, how many hours have you worked a week in the past 12 months? Freq. Percent Less than 20 hours a week 4 0% Between 20 and 40 hours a week 120 12% Between 40 and 60 hours a week 690 71% More than 60 hours a week 157 16% 10) Given your response to the above question, have your hours increased, remained about the same or decreased in the past 12 months? Freq. Percent Increased 238 25% Remained about the same 611 63% Decreased 119 12% 11) How do you deal with stress? Freq. Percent Exercise 682 69% Sports 344 35% Hobbies 378 38% Vacations 521 52% Other 161 16% 12) In the wake of the California recall, how do you feel about recall elections in general? Freq. Percent It is a useful tool to hold politicians accountable 491 51% It is a waste of taxpayers’ money 296 31% It perpetuates political partisanship 116 12% Other 49 5% No opinion 15 Risky tool 10 Mockery of state government 9 Not good for government 6 Poor legislation 4 Poor law 3 Ineffective 2 13) What do you think will be the most critical issue in next year’s presidential election? (Choose all that apply). Freq. Percent Economy 730 76% Tax cuts 15 2% Unemployment 34 4% Consumer confidence 43 4% Terrorism 67 7% Education 7 1% Healthcare 37 4% Other 35 4% Iraq situation 17 Presidential credibility 6 Budget 6 Miscellaneous 6 14) Do you believe that the effects of 9/11 are still being felt and have delayed the economic recovery in 2003? Freq. Percent Yes 669 70% No 235 25% Undecided 54 6% 15) Two years after 9/11, what has been the effect on your business? (Choose all that apply). Freq. Percent Travel cancelled 213 21% Business cancelled (orders, sales, product development) 260 26% Productivity reduced 104 10% Lay offs 177 18% Delayed expansion 276 28% Reduction in spending 352 35% All of the above 95 10% No impact 249 25% Other 69 7% Reduced cashflow & growth 24 Increased business 14 Miscellaneous 12 Downturn in economy 6 No impact 6 Increased costs 4 Travel hassles 3 16) President Bush is: Freq. Percent Doing a poor job of leading the peacekeeping effort in Iraq 162 17% Doing a fair job of leading the peacekeeping effort in Iraq 353 37% Doing a good job of leading the peacekeeping effort in Iraq 332 34% Doing an excellent job of leading the peacekeeping effort in Iraq 117 12% 17) Given the recent bombing of the U.N. headquarters in Baghdad, do you think the U.S. should send more troops into Iraq? Freq. Percent Yes 218 23% No 557 58% Undecided 192 20% </pre>

ABOUT THE TEC CONFIDENCE INDEX

The TEC Confidence Index is a compilation of responses from more than 1,000 CEOs of small to mid-size companies, and is the only comprehensive report of their opinions and projects. The survey is conducted quarterly by TEC International, the world’s largest organization of CEOs of small to mid-sized businesses. U.S. businesses with annual sales between $1 million and $1 billion represent the most vital component of the nation’s economy. This small to mid-size business sector creates 75 percent of all new jobs and generates 80 percent of revenue. The opinions of these business leaders provide a clear snapshot of current economic, market, as well as industry trends and their plans for growth over the next 12 months. These insights provide a leading indicator for employment, capital expenditure, sales, and revenue trends. In addition to the U.S. survey, TEC International also surveys chief executives in Australia, Canada, Malaysia and the UK for a more global perspective on the top economic and topical issues facing the world’s CEOs.

ABOUT TEC INTERNATIONAL

Founded in 1957, TEC International (www.teconline.com) is the global leader in CEO development. With a membership consisting of more than 8,000 members in 15 countries worldwide, TEC is a comprehensive representation of U.S. small and mid-sized business — a population that comprises more than 80 percent of the nation’s annual revenue.

About the HedgeCo News Team

The Hedge Fund News Team stays on top of breaking news in the Hedge Fund industry on an hourly basis. Signup to HedgeCo.Net to recieve Daily or Weekly news updates from our team.

View all posts by the HedgeCo News Team →

This entry was posted in HedgeCo News. Bookmark the permalink.

Comments are closed.