A note of caution, but hiring to continue.
AFTER A SURGE of confidence in May, CEOs appeared a bit more tentative in June. Energy costs and the certainty of higher interest rates figured in their more cautious tone. But significantly, and in a break with past trends, CEOs are showing no signs that they plan to slow down their hiring.
The broadest indicator, the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Confidence Index, eased slightly last month, from 172.8 to 169.5 (see chart, far left), and most of its components, such as Future Confidence and Current Confidence, also deelined. (For full results, go to www.chiefexecutive.net.)
But the surprise was that the only clearly positive indicator was Employment Confidence, which increased by 5 points, to 181.1. Nearly 1 million jobs have been added to the U.S. economy in recent months, and the most recent confidence numbers suggest that hiring will continue.
That's particularly significant in view of the concerns that CEOs show about some macroeconomic mac·ro·ec·o·nom·ics
n. (used with a sing. verb)
The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. trends. When asked which would have the greatest impact on their business, some 42 percent of our 349 respondents said energy prices, versus 34 percent who cited interest rates. The remainder said they didn't expect either of those two factors to have an impact on their businesses (see chart, second from left).
"Clearly, the cost of energy has the potential to stop the growth and expansion of the economy," wrote Kenneth C. Beam, president and CEO of the Pegasus Logistics Group in Grapevine Grapevine - A distributed system project. , Tex. "There is a point at which businesses and consumers will reduce spending to cover these 'necessary' inflated costs."
Many readers noted that interest rates already are low in the U.S. compared with some other countries, and they consider a move by the Federal Reserve to be necessary. "The Federal Reserve Board has no choice," wrote Robert A. Kegel, president of Kegel Engineering Associates in Scottsdale. Ariz. Like many prognosticators, he foresees a modest increase before the November election, followed by more hikes afterward af·ter·ward also af·ter·wards
At a later time; subsequently.
Adv. 1. afterward - happening at a time subsequent to a reference time; "he apologized subsequently"; "he's going to the store but he'll be back here . "It becomes essential that there be increases to attract additional foreign investment to the U.S. economy," he argues.
Few CEOs see either oil prices or interest rates as being serious threats to the overall economy. "We will all cry a little, but we'll be strong in the long run," wrote J.B. Lang of Advantech International in Somerset, N.J.
Elsewhere, two interesting trends have emerged in our supplemental data. The confidence of CEOs who manage companies of $250 million or more in sales is decidedly higher than that of CEOs of smaller concerns (see chart, second from right). As recently as the beginning of 2004, the small companies were more optimistic op·ti·mist
1. One who usually expects a favorable outcome.
2. A believer in philosophical optimism.
op . Now it has reversed. Size and scale are arguably ar·gu·a·ble
1. Open to argument: an arguable question, still unresolved.
2. That can be argued plausibly; defensible in argument: three arguable points of law. more important in today's globalized environment.
Second, the confidence of CEOs of privately held companies privately held company
A firm whose shares are held within a relatively small circle of owners and are not traded publicly. , after lagging Lagging
Strategy used by a firm to stall payments, normally in response to exchange rate projections. behind that of their counterparts at publicly traded companies publicly traded company
A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. , has essentially caught up (see chart, far right). Could it be that not having to comply with the Sarbanes-Oxley Act See SOX. makes private CEOs feel better about their businesses?
RELATED ARTICLE: THE NUMBERS
Emerging Concerns Which has the potential for having the greatest impact on your business? Neither 23.8% Increased interest rates 34.1% Energy Prices 42.1% 1 to 2 % over the next year based on crude oil to be sold at $40 a barrel Note: Table made from pie chart.