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Conference Board and PwC: CEO Confidence Increases Slightly

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Conference Board and PwC: CEO Confidence Increases Slightly

69% of CEOs expect profit increases in the near term.

The Conference Board and PwC Measure of CEO Confidence, which had declined in the first quarter of 2015, increased slightly in the second quarter. The Measure now reads 58, up from 57 in the first quarter of 2015 (a reading of more than 50 points reflects more positive than negative responses). 

"Optimism among CEOs increased moderately in the second quarter with expectations for the U.S. and globally slightly more upbeat. However, the outlook for China remains cautious while expectations for Brazil remain negative," said Lynn Franco, Director of Economic Indicators at The Conference Board. "More than two-thirds of CEOs expect profits will increase over the coming year, with market/demand growth and cost reductions the major driving forces."

CEOs were more optimistic overall regarding the short-term outlook than earlier this year.

CEOs' appraisal of current economic conditions was less positive than last quarter. Now, just 46% claim conditions are better compared to six months ago, down from 55% in the first quarter of the year. However, business leaders' assessment of conditions in their own industries was more positive, with 49% saying conditions in their own industries have improved, compared with 35 percent in the prior quarter.

CEOs were more optimistic overall regarding the short-term outlook than earlier this year. Slightly over 38% of business leaders anticipate economic conditions will improve over the next six months, up marginally from last quarter. Expectations for their own industries were more upbeat, with 40% of CEOs anticipating an improvement versus 34% in the first quarter of this year.

Global Outlook

CEOs were less positive in their assessment of current economic conditions for the US and India, although overall sentiment remains in positive territory. Sentiment regarding Europe and Japan has shifted and is now more upbeat, but CEOs' assessment of current conditions in China and Brazil has grown more pessimistic, and remains in negative territory. 

Looking ahead, CEO expectations for the US and globally were more positive, but the outlook for China remains cautious and expectations for Brazil negative.

Market/Demand Growth and Cost Reductions Primary Drivers of Profit Growth

Regarding profit expectations over the next 12 months, 69% of CEOs surveyed expect profits will increase. Executives in the durable industries are more optimistic, with almost three out of four expecting profits to increase. About 70% of CEOs in the nondurables industry and 64% in services expect an increase in profits.

Among chief executive officers who expect profits to rise, 43% say market/demand growth will be the primary driving force, while 41% cite cost reductions. The remaining 16% are equally divided between new technology or price increases as the main source of improvement.

 

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