CEOs Plan to Increase Hiring in Year Ahead Despite High Unemployment Rates.

Business Editors

Topical News: War On Terrorism 

SAN DIEGO--(BUSINESS WIRE)--June 10, 2003

Q2 TEC Index Reveals Nation's Leaders Fear Low Consumer Confidence,

North Korea and Another Terrorist Attack, Not SARS

TEC International, the world's largest organization of CEOs, today released Q2 results of the TEC Index, a quarterly survey of TEC member chief executives. The TEC Index is the only index that polls CEOs nationwide on current economic trends and issues affecting today's small to mid-sized business climate. In the Q2 survey, for which 1,041 CEOs nationwide were polled during the week of May 26, TEC CEOs expressed their views on the country's current and future economic state, employment plans, capital expenditures, expected revenue and profit growth, and the relative value of the U.S. dollar. The survey also addressed the impact of SARS on business, investment plans, critical issues for next year's presidential election, which countries present the most danger towards the United States and the potential for another terrorist attack.

This quarter TEC expanded the global scope of its survey by adding Malaysia to the list of TEC member countries participating in the survey, in addition to Australia, Canada and the UK. The result is a broader, worldwide perspective on the top economic and topical issues facing the world's CEOs. Also new this quarter, TEC worked with Dr. Richard Curtin, Director of Surveys of Consumers for the University of Michigan, as a consultant on the Index.

According to the Q2 TEC Index, American CEOs surveyed are cautious but optimistic; nearly 70 percent expect economic conditions in the U.S. to improve over the next 12 months. Looking back, 43 percent of CEOs believe overall economic conditions in the U.S. have remained about the same compared to a year ago. The remaining respondents were closely divided on whether the economy has improved or worsened.

Despite the Labor Department's recent report that the current unemployment rate is at the highest level since July 1994, more than 50 percent of CEOs surveyed expect to increase their firm's total number of employees during the next 12 months. Nearly 40 percent plan to maintain their current employment levels, while only 11 percent anticipate some reduction in staff in the next 12 months.

Regarding capital expenditures, CEOs remain divided: 43 percent expect to increase expenditures yet 43 percent plan on no change in their investment spending. Only 12 percent plan to decrease the amount of their capital expenditures in the next 12 months.

"The Q2 TEC Index survey indicates that a renewed sense of optimism has begun to take hold in the United States," said Dr. Curtin. "Although most CEOs did not judge the past performance of the economy very favorably, most plan to cautiously increase their hiring and investment expenditures during the year ahead."

Other positive signs include the fact that close to 75 percent of chief executives expect their firm's sales revenues to increase in the next year and that 65 percent predict their firm's profitability will improve. In addition when asked about personal investment, nearly 50 percent of CEOs are planning to invest in stocks and real estate during the next 12 months.

Compared with other currencies, American CEOs are divided on whether the U.S. dollar will stay about the same or get weaker during the next 12 months: 43 percent predict no change in value and 39 percent believe it will decrease. However, even if the value of the U.S. dollar does not get any lower than the current rate, 43 percent of all CEOs thought that U.S. exports had already gained an advantage in world markets.

Regarding the future stability of the U.S. economy, 43 percent of CEOs surveyed view the lack of consumer confidence as the greatest threat, following the potential for another terrorist attack at 31 percent. Concerning the ability of the war in Iraq to reduce terrorism fears, only 15 percent feel less worried about terrorism following the war. This means 21 percent are actually more concerned and 64 percent are as concerned about the risk of another terrorist attack as they were prior to the war's start. Similarly, nearly 50 percent of CEOs view North Korea as the biggest threat to the U.S., following with Iran at 21 percent, Saudi Arabia at 13 percent and Syria at eight percent.

SARS is not top of mind for American CEOs, as nearly 80 percent believe SARS has had no impact on their business; however, 12 percent did stop all travel to Asia Pacific.

More than 80 percent feel the economy will be the single most critical issue in next year's presidential election. Interestingly enough, the top responses for actions that would have the most positive impact on the U.S. economy include increased tax cuts at 33 percent and capturing Osama bin Laden at 26 percent.

2003 U.S. Q2 TEC INDEX SURVEY RESULTS

NOTE: TOTALS MAY VARY DUE TO ROUNDING AND THE OPTION TO CHOOSE MORE THAN ONE RESPONSE

    May-03
    # of respondents:                  1041
    # of surveys sent:                 5411
    Response rate:                       19%
    Survey tool:                       Reciprix
    Analysis completed:                6/3/2003
    Margin of Error:                   W/ 95% MARGIN OF ERROR = 3.0%
                                       WITH 99% CONFIDENCE INTERVAL
                                       MARGIN OF ERROR = 4.0%

1) Compared with a year ago, have overall economic conditions in
   the U.S. improved, remained about the same, or worsened?

                                       Freq.            Percent
   Improved                             305               30%
   About the same                       446               43%
   Worsened                             276               27%

2) During the next 12 months, do you expect the overall economic
   conditions in the U.S. to be better, about the same, or worse than
   now?

                                       Freq.            Percent
   Better                               683               67%
   About the same                       291               28%
   Decrease                              50                5%

3) Do you expect your firm's total number of employees to
   increase, remain about the same, or decrease during the next 12
   months?

                                       Freq.            Percent
   Increase                             525               52%
   About the same                       383               38%
   Decrease                             109               11%

4) Do you expect your firm's total fixed investment expenditures
   to increase, remain about the same, or decrease during the next 12
   months?

                                       Freq.            Percent
   Increase                             448               43%
   About the same                       442               43%
   Decrease                             122               12%

5) Do you expect your firm's sales revenue to increase, remain the
   same, or decrease for the next 12 months?

                                       Freq.            Percent
   Increase                             752               74%
   About the same                       204               20%
   Decrease                              65                6%

6) Do you expect your firm's profitability to improve, remain the
   same, or worsen during the next 12 months?

                                       Freq.            Percent
   Improve                              660               65%
   About the same                       259               25%
   Worsen                                99               10%

7) Do you expect the value of the U.S. dollar compared with other
   currencies to be stronger, about the same, or weaker during the
   next 12 months?

                                       Freq.            Percent
   Stronger                             185               18%
   About the same                       433               43%
   Weaker                               395               39%

8) Is the U.S. dollar currently at a level where it can stimulate
   an increase in exports?

                                       Freq.            Percent
   Yes                                  424               43%
   No effect yet                        422               43%
   Needs to drop lower                  132               13%

9) Where do you personally plan to invest during the next 12
   months?

                                       Freq.            Percent
   Stocks                               490               47%
   Bonds                                160               15%
   Real estate                          492               47%
   Other                                101               10%
   No planned investments               183               18%


Other: Please specify:
---------------------------------------------
Acquisition                                4
Own company                               34
Funds                                     22
New business                              12
Private dealings                          13
Miscellaneous                             14
---------------------------------------------
Total:                                    99
---------------------------------------------

10) President Bush is:

                                       Freq.            Percent
    Doing a poor job leading post-war
    reconstruction in Iraq              159               16%
    Doing a fair job leading post-war
    reconstruction in Iraq              347               34%
    Doing a good job leading post-war
    reconstruction in Iraq              378               37%
    Doing an excellent job leading
    post-war reconstruction in Iraq     134               13%

11) Are you concerned about the sharp drop in U.S. inflation
    turning into deflation?

                                       Freq.            Percent
    Yes                                 264               26%
    Unsure                              283               28%
    No                                  472               46%

12) What do you think will be the most critical issue in next
    year's presidential election?

                                       Freq.            Percent
    Economy                             834               82%
    Tax cuts                             10                1%
    Unemployment                         33                3%
    Consumer confidence                  66                6%
    Terrorism                            44                4%
    Education                             2                0%
    Healthcare                           34                3%

13) What do you see as the greatest threat to the U.S. economic
    future?

                                       Freq.            Percent
    Cost of reconstruction in Iraq       14                1%
    Another terrorist attack            319               31%
    Lack of consumer confidence         446               43%
    Unemployment                         94                9%
    SARS                                  4                0%
    Another war within the next
    12 months                            36                4%
    Other                               115               11%

Other: Please specify:
------------------------------------------------
Business confidence                           3
George Bush                                   3
China                                         9
Deficit spending                             26
Democrats                                     4
World economy                                12
Export of manufacturing jobs                 10
Lack of business profits / spending           6
Lack of leadership                            5
Miscellaneous                                36
------------------------------------------------
Total                                       114
------------------------------------------------

14) What action do you think would have the most positive impact
    on the U.S. economy?

                                       Freq.            Percent
    If the Federal Reserve cuts
    interest rates again                107               11%
    Capturing Osama bin Laden           262               26%
    More tax cuts                       332               33%
    If the Federal government spends
    more money on healthcare and
    other related projects              104               10%
    Other                               193               19%

Other: Please specify:
----------------------------------------------
Balanced budget                            47
Consumer confidence                        19
Successful war on terrorism                 8
Control of healthcare costs                 8
Lower unemployment                         10
Tax cuts                                   11
Unsure                                      9
Economic growth                            15
Less government                             8
Fair trade with China                       4
Miscellaneous                              45
----------------------------------------------
Total                                     184
----------------------------------------------

15) How has SARS impacted your business?

                                       Freq.            Percent
    Stopped all travel to Asia Pacific  121               12%
    Reduced business relations with
    Asia Pacific                         36                3%
    Positive impact on business          20                2%
    No impact on business               821               79%
    Negative impact on business          76                7%

16) Are you more or less concerned about terrorism following the
    war in Iraq?

                                       Freq.            Percent
    More concerned                      215               21%
    No change                           649               64%
    Less concerned                      151               15%

17) Which country do you currently view as presenting the most
    danger towards the U.S.?

                                       Freq.            Percent
    North Korea                         474               47%
    Iraq                                 33                3%
    Saudi Arabia                        135               13%
    Afghanistan                           5                0%
    Syria                                79                8%
    Iran                                209               21%
    Other                                74                7%

Other: Please specify:
------------------------------------------------
China                                        24
USA                                          15
Middle East                                  17
Not a country: organized terrorists           8
Unsure                                        4
Miscellaneous                                 9
------------------------------------------------
Total                                        77
------------------------------------------------

ABOUT THE TEC INDEX

U.S. businesses with annual sales between $1 million and $1 billion represent the most vital component of the nation's economy. This small to mid-size business sector creates 75 percent of all new jobs and generates 80 percent of revenue. The opinions of these business leaders provide a clear snapshot of current economic, market, as well as industry trends and their plans for growth over the next 12 months. These insights provide a leading indicator for employment, capital expenditure, sales, and revenue trends. The TEC Index is a compilation of responses from more than 1,000 CEOs of small to mid-size companies, and is the only comprehensive report of their opinions and projections. The TEC Index is conducted quarterly by TEC International, the world's largest organization of CEOs of small to mid-sized businesses.

ABOUT TEC INTERNATIONAL

Founded in 1957, TEC International (www.teconline.com) is the global leader in CEO development. With a membership consisting of more than 8,000 members in 14 countries worldwide, TEC is a comprehensive representation of U.S. small and mid-sized business -- a population that comprises more than 80 percent of the nation's annual revenue.