Chief executives’ confidence in the nation’s economy dipped slightly in the second quarter, The Conference Board reported today.
The index used to measure executive confidence dipped to 70 points in the second quarter after it surged to 73 points in the first quarter of 2004. A reading of more than 50 points reflects more positive than negative responses.
CEOs’ overall assessment of current conditions remained positive in the second quarter and the measure of current economic conditions held steady at 78 points. More than 90 percent of CEOs claim current economic conditions have improved, the same as last quarter. In assessing their own industries, the measure edged up to 72 from 71. More than 70 percent say conditions are better now compared with six months ago.
In looking ahead to the next six months, CEOs’ expectations were more subdued than last quarter. Business leaders’ outlook for the economy dipped to 68 points from 72 points. Their expectations for their own industries also posted a decline, with the measure slipping to 65 points from 70 points.
“Despite the dip in overall confidence, CEOs are very upbeat about the outlook for the next six months,” said Lynn Franco, director of The Conference Board’s Consumer Research Center. “Profit expectations are much improved from a year ago and the majority of business leaders cite an increase in market demand as the main impetus.”
About 88 percent of chief executives expect profits to rise, up from a year-ago reading of 65 percent. But there are differences among and within industries. About 84 percent of executives in the services industry expect profit increases. But among manufacturers, those in the durable goods industry were more optimistic than those in the non-durable sector.
Among executives who expect profits to advance, 60 percent cite increases in market/demand growth to be the key reason. About 25 percent cite cost reductions. Seven percent of CEOs believe technology will be the main source of profit growth, and the remaining 8 percent believe price increases will boost profits.
The Conference Board’s quarterly measure of CEO confidence covers more than 100 CEOs in a wide variety of industries.
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