A key indicator that measures chief executives’ confidence in the economy improved slightly in the fourth quarter, as the majority of businesses plan to raise prices for their goods and services this year, The Conference Board reported today.
The Chief Executives’ Confidence Measure, which had fallen to 44 in the third quarter of 2006, improved to 50 in the final quarter of 2006, according to The Conference Board’s latest survey of nearly 100 business leaders in a wide range of industries. A reading of more than 50 points reflects more positive than negative responses.
“The bounce-back in CEO confidence suggests further economic growth in the first half of 2007,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. “However, there is little to suggest a significant strengthening or deterioration in the pace of growth. On the inflation front, CEOs anticipate price increases of about 3.3 percent for the year, slightly down from last year’s estimate of 3.4 percent.”
CEOs’ confidence in current-day conditions was mixed and, on average, rather anemic, according to the survey. Now, just 24 percent of CEOs claim the current economic environment is better, up from about 16 percent in the third quarter. However, in assessing their own industries, business leaders were less positive than last quarter, as approximately 23 percent claimed conditions are better, down from 28 percent last quarter.
CEOs’ optimism about the short-term outlook improved from the third quarter, with nearly 29 percent of business leaders expect economic conditions to improve in the next six months, up from 16 percent last quarter. Expectations for their own industries were also more positive, with about 34 percent anticipating an improvement, up from 20 percent last quarter.
The majority of chief executives expect changes in their firms’ selling prices in 2007, with just 10 percent anticipating price increases in excess of 10 percent. On average, firms plan to hike prices by 3.3 percent, slightly lower than last year’s expectation of 3.4 percent. Some 7 percent plan decreases, and 14 percent foresee no change.