Majority of CEOs See Rising Home Prices as a Positive Economic Indicator

Jul 03, 2013 No Comments by

SAN DIEGO, July 3, 2013 /PRNewswire/ – CEOs held optimistic views about the overall economy as well as for their own firms in the Q2 2013 Vistage CEO Confidence Index. While there was a slight shift in their assessments of the economy, how CEOs viewed prospects for their own firms has been remarkably stable since the start of the year. The Vistage CEO Confidence Index was 96.7 in the 2nd quarter 2013survey, virtually unchanged from the 96.6 in the 1st quarter, and above the 92.8 in last year’s 2nd quarter. The majority of CEOs saw rising home prices as a favorable economic sign, although a sizable minority still thought it was too early to judge the housing turnaround as a clear plus for the economic outlook.  Surprisingly, the economic impact of higher payroll taxes and the spending sequester has been nearly imperceptible, as continued improvement in the economy has offset concerns about the fiscal cliff. CEOs were still cautious in their outlook, but believed that they have learned to thrive in a slow growth environment.

Economy Improves. In the 2nd quarter 2013 survey, 53% of all CEOs reported that the economy had recently improved, up from 49% one quarter ago and 36% one year ago. A scant 9% of all firms reported that the economy had worsened during the past year. When asked about economic prospects for the year ahead, twice as many expected continued improvement as thought the economy would slow. CEOs only expect a modest pace of economic growth, an outlook that they have accommodated.

Hiring Plans Steady. Expanding their payrolls during the year ahead was planned by 52% of all firms in the 2nd quarter 2013 survey, unchanged from last quarter. Net declines in employees were expected by just 9%. The hiring, training and retention of employees remains a key task for firms. Indeed, when asked about the most important issue currently facing their firms, staffing was the most frequently mentioned.

Training employees is critical. Two-thirds of all firms had formal orientation programs for new employees. Moreover, all employees received additional training that was offered by virtually all firms. The training programs were staffed by in-house trainers (69%), by outside experts (23%) and by online programs (4%).

Robust Investment Plans. Planned increases in investments in new plant and equipment were reported by 41% in the 2nd quarter 2013 survey, above the 35% recorded six months ago and just ahead of the 40% in last year’s 2nd quarter survey. Just 12% anticipated a reduction in new investment spending in the year ahead. While economic uncertainty still clouds the horizon, these concerns have been offset by prospects for increased revenues. Financing investments is still troublesome for some firms, especially those that must rely on borrowed funds. Among the half of firms that use credit, they were evenly split on whether or not it was now easier to obtain credit than six months ago. Although credit standards have been easing, some firms still face unusually high hurdles, and in the year ahead may also face higher interest rates.

Stable Revenues and Profits. Two-thirds of all firms expected growth in their firm’s revenues in the year ahead in the 2nd quarter 2013 survey, identical to the 1st quarter reading. Just 8% anticipated a decline in their total revenues. This favorable expectation was not due to price increases they anticipated for their products or services, as nearly two-thirds expected no increases in their prices. Improved sales prospects meant that firms increasingly focused on staffing and retaining and expanding their customer base. Increased profitability was expected by 52% of all firms, just below the 53% recorded one quarter and one year earlier. Managing costs, especially rising health care costs, were still a priority to maximize profits.

 

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