Chief executives’ confidence in the economy edged up in the first quarter 2006, The Conference Board reported in its latest survey of CEOs, though more CEOs said they expect employment in their industries to decline.
The chief executives’ confidence measure, which had improved to 56 in the final quarter of 2005, edged up to 57 in the first quarter of 2006, according to the survey, which includes about 100 business leaders in a wide range of industries. A reading of more than 50 points reflects more positive than negative responses.
“CEOs are less confident about the future state of the economy than they were at the close of 2005,” said Lynn Franco, director of The Conference Board Consumer Research Center. “As a result, many anticipate hiring plans to cool and employment levels to decline. This is yet another sign the second half of 2006 is not likely to be as strong as the first half.”
CEOs’ assessment of current business conditions improved – the key reason for the uptick in the overall measure, The Conference Board said. Some 49 percent of CEOs say current economic conditions are better, up from nearly 44 percent in the fourth quarter of 2005.
In assessing their own industries, business leaders were also more upbeat than last quarter. About 52 percent say conditions are better, up from 39 percent in the prior survey.
But CEOs are not as optimistic about the next six months as they were in the final quarter of 2005. Now, only 35 percent of business leaders expect economic conditions to improve in the coming months, down from 41 percent last quarter. Expectations for their own industries were also more subdued, with 35 percent anticipating an improvement, down from 44 percent last quarter.
Approximately 46 percent of CEOs anticipate an increase in employment levels in their industry, about the same as last year when 44 percent said they expected an increase. But the proportion of CEOs that anticipate a decline in jobs over the next six months rose sharply to 24 percent, up from about 11 percent a year ago.
Health care costs remain the major obstacle to hiring new workers. Regulation and litigation costs were second on the list, while other fringe benefits and wage and salary costs remain of lesser concern to business leaders when hiring new workers.
The Conference Board is a nonprofit research and business group.