Tuesday, June 28, 2011

SMB CEOs’ Economic Outlook Dims

FOR IMMEDIATE RELEASE

June 28, 2011

Robins School of Business –Virginia Council of CEOs 2nd quarter survey finds continued uncertainty about business, economy for the next six months

For the second straight quarter, CEOs in central Virginia have shown a more pessimistic view of business and the economy looking ahead six months, according to the 2nd quarter 2011 CEO Economic Outlook Survey. The findings are in contrast to CEOs’ relative optimism in 2010.

The survey reveals that top executives of small and mid-sized companies anticipate either unchanged or decreased capital spending and hiring. Slightly more than half predict increased sales for the next two quarters. And results show that “economic uncertainty” is the most significant business issue CEOs face today, ahead of rising energy and healthcare costs, staffing, financial issues and political uncertainty.

The Virginia Council of CEOs and University of Richmond’s Robins School of Business jointly conduct the quarterly survey, which helps central Virginia companies anticipate business decisions and plan for growth.

“This is a clear indication that the current mindset of the CEO is to proceed with caution,” said Scot McRoberts, executive director of the council. “We are seeing good growth in a few sectors – health care, IT and staffing particularly.  But, there is not a lot of confidence in either the overall growth of the economy or what Washington will do in terms of taxes and regulation.”

The following survey results, from the 2nd quarter 2011 and the 1st quarter 2011, show projections for the next six months for sales, spending and employment:

2011 Q2 2011 Q1
Increase No Change Decrease Increase No Change Decrease
How do you expect your company’s sales to change in the next six months? 54.7% 32.0% 13.3% 69.9% 21.9% 8.2%
How do you expect your company’s U.S. capital spending to change in the next six months? 31.1% 40.5% 28.4% 28.8% 56.2% 15.1%
How do you expect your company’s U.S. employment to change in the next six months? 39.2% 50.0% 10.8% 39.7% 52.1% 8.2%

The council and the Robins School collected responses from 75 business owners and CEOs in central Virginia. The average annual revenue year-to-date for CEOs responding was $3.3 million. The data was compared to the 1st quarter 2011 survey, which consisted of 73 participants. Multiple industries are represented in the sample (for example, construction, manufacturing, finance and insurance, and retail).

“What we see in these current data, relative to the previous quarter, are more CEOs anticipating no change, or a decrease, in some of their core business practices,” said Jeff Pollack, assistant professor of management at the Robins School, who calculated the results. “Based on data we collected about the issues these CEOs face, it could be that slow economic growth and economic uncertainty are related to this more pessimistic outlook.”

Pollack adapted the survey from the Business Roundtable, an association of CEOs leading U.S. companies that conducts a similar survey nationally.

The results also provide an overall economic outlook index, which is based on businesses’ projected six-month sales, spending and employment figures.

Economic Outlook Index

Survey Date CEO Economic Outlook Index
Q2 2011 74.17
Q1 2011 85.63
Q4 2010 92.27
Q3 2010 94.47

The council continues to expand the survey beyond its members, offering any area business owners whose companies gross at least $1 million in annual revenue the opportunity to participate. If enough businesses participate, the council will provide survey results by industry. Participation is free, and all participants will receive copies of the survey data.

Business owners and CEOs who would like to participate in the next survey should contact McRoberts at smcroberts@vaceos.org.

Posted by smcroberts at 4:33 pm
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