CEO Confidence Improves Again

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The Conference Board Measure of CEO Confidence™, which had increased slightly in the first quarter of 2016, increased again in the second quarter of this year. The Measure now reads 52, up from 47 in the previous quarter (a reading of more than 50 points reflects more positive than negative responses). 

“Confidence among CEOs increased for the second quarter this year. CEOs’ short-term outlook for the U.S. is somewhat neutral, while the outlook for Japan, China, and Brazil improved from last quarter, but on whole remains negative. Prospects for India and Europe were moderately positive, although sentiment is likely to have changed following the approval of the Brexit referendum in June,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Three out of every four CEOs expect profits will increase over the coming year, with market/demand growth and cost reductions the major driving forces.” 

CEOs’ assessment of current economic conditions improved somewhat, with 21% saying conditions are better compared to six months ago, up from about 19 percent last quarter. Business leaders’ appraisal of current conditions in their own industries was considerably more favorable, with 30%stating conditions in their own industries have improved, up from 18% in the first quarter. 

CEOs’ short-term outlook continued to improve, with about 25% expecting better economic conditions over the next six months, up from 18% last quarter. The outlook for their own industries was also more favorable, with almost 33% of CEOs anticipating an improvement in conditions over the next six months, up from 22% in the first quarter.

Global Outlook

CEOs’ assessment of current conditions in India and the United States remains neutral to slightly positive, respectively. Current conditions in Europe, Japan, China and Brazil improved from last quarter, but CEO sentiment remains in negative territory. 

Short-term expectations for the U.S. declined slightly and are now in neutral territory. CEOs continue to view prospects for India and Europe as moderately positive. The outlook for Japan, China, and Brazil improved from last quarter, but on whole remains negative.

Profit Expectations for 2016 Improve

Regarding profit expectations over the next 12 months, some 75% of CEOs surveyed expect profits will increase, up from about 68 percent last year. Executives in the nondurable industries are the most optimistic, with 90% expecting profits to increase. About seven out of ten CEOs in the nondurables and services industries expect an increase in profits. 

Among chief executive officers who expect profits to rise, 41% say cost reductions will be the primary driving force, while 35% cite market/demand growth. New technology is cited by 14% of CEOs as the primary driver of improvement, and 10% attribute increased profits to price increases.

About The Conference Board

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