CHIEF EXECUTIVES LESS OPTIMISTIC ABOUT FUTURE OF U.S. ECONOMY; Most Plan to Raise Prices 5% or Less in 1995.

NEW YORK--(BUSINESS WIRE)--December 21, 1994--U.S. chief executives continue to view current U.S. economic conditions favorably, but are increasingly concerned about future prospects, The Conference Board reports today.

The Board's Measure of Business Confidence edged down two points to 56 in the final quarter of 1994 (A reading of more than 50 reflects more positive than negative responses).

After peaking at 65 at the beginning of the year, The Board's business confidence has declined for three consecutive quarters. Still, business confidence is comfortably high, roughly matching levels seen in the mid- to late- 1980s.

The Conference Board's quarterly survey of business confidence covers a representative sample of about 300 CEOs from a wide cross-section of U.S. industries.

"While business leaders are happy with the current mix of strong growth, rising productivity, and low inflation, optimism about the near-term business outlook is receding," says Jason Bram, Conference Board economist. "Evidently, higher interest rates and capacity constraints in some industries are expected to limit economic growth in the first half of 1995."

In assessing the current state of the U.S. economy, most CEOs remain upbeat. Nearly 65% say that general business conditions are better than six months ago; only 6% say they are worse. These are similar to third-quarter survey responses. But in assessing conditions in their own industries, respondents are not quite as cheery. Slightly over half cite improvement, while 17 percent report some slowing. There is some variation by industry group: Manufacturers report very favorable conditions, but reports are mixed in most service industries, and very negative among the utilities.

Business leaders' expectations for the next six months continue to weaken. Just under 35% of those surveyed foresee the economy improving, while nearly 25% anticipate a slowdown. As recently as the second quarter of this year, optimists outnumbered pessimists by a ratio of five to one. In assessing prospects for their own industries, opinion was also mixed. Expectations in the insurance industry surged to a two-year high, while respondents in paper, printing and publishing also expressed strong optimism. However, CEOs in the machinery industry, wholesale and retail trade, utilities, and finance were, on balance, pessimistic.

MODEST PRICE HIKES ON THE HORIZON

Most chief executives anticipate only modest changes in their firms' selling prices in 1995. Overall, one in four sees prices flat to lower next year, while another three-fifths plan increases of 5% or less. Just 14% expect to hike prices by more than that. The average firm plans an increase of 3.7%--up from a 2.2% forecast for 1994, based on an identical survey at the end of 1993.

In sharp contrast with last year's survey, manufacturers plan larger hikes than other industries in 1995 (probably due to higher commodity prices): 4.1% in nondurable; 5.6% in durables. But elsewhere, CEOs anticipate more modest price increases: 3.2% in wholesale and retail trade; 2.4% in insurance; and less than 2% in mining, utilities, and business services.

"With most wholesalers and retailers, planning small price hikes, consumer prices inflation should continue to be moderate in 1995," concludes Bram.

Source: Business Executives' Expectations

        Fourth Quarter, 1994
        The Conference Board

CONTACT: The Conference Board, New York

Jason Bram, 212/339-0340