Happy Days Here Again?
Stop us if you've heard this one before.
According to the latest survey of chief executive officers conducted by The Conference Board, CEO confidence in the U.S. economy is picking up. In fact, The Conference Board's Measure of Business Confidence came in at 60 in the second quarter, well up from 53 in the first quarter (a score of more than 50 points indicates more positive responses than negative ones).
The quarterly survey covers approximately 100 CEOs working in a variety of industries. "[The] latest survey results show steady improvement in CEO confidence levels since the beginning of the year," says Lynn Franco, director of The Conference Board's Consumer Research Center. "Growing optimism about profits suggests stronger corporate performance ahead."
Indeed, the survey respondents appeared downright upbeat about current—and future—business conditions. The measure of confidence in current "business conditions" (as opposed to confidence in an economic recovery) came in at 55, up from 40 in the first quarter. Confidence in business conditions during the next six months rose to 66, a 6-point jump from Q1.
Given this general increase in warm-and-fuzzy feelings on the part of CEOs, it's not surprising that the majority of respondents (65 percent) believe their company profits will rise. Interestingly, about 67 percent of the polled CEOs who work in the services industry think earnings will increase. On the other hand, only 44 percent of CEOs in the nondurable-goods manufacturing sector expect an uptick in net income.
That sort of stubborn pessimism (and in an important sector, no less) underscores the fragility of any economic recovery. Many economists believe spending cuts—and not top-line initiatives—are what's fueling increased profitability at U.S. corporations. The Conference Board's survey certainly did nothing to dispel that notion. Of the respondents who predicted an increase in earnings, 37 percent said cost-cutting is what's pushing up profits.
Moreover, predictions of an economic turnaround are not likely to cheer the ranks of the unemployed. That list is getting longer all the time. Last week the Department of Labor reported that unemployment hit a worrisome 6.4 percent in June. If, as The Conference Board survey suggests, an economic recovery is under way, then it must be a jobless recovery.
cfo.com |
