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CEO Confidence Declines Slightly

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CEO Confidence Declines Slightly

CEOs still optimistic, however.

According to The Conference Board and professional services firm PwC, CEO confidence, which had increased in the first quarter of 2014, declined slightly in the second quarter. The firms’ index for CEO confidence now reads 62, down from 63 last quarter (a reading of more than 50 points reflects more positive than negative responses).

Says Lynn Franco, Director of Economic Indicators at The Conference Board: "CEOs are slightly less confident than in Q1, as both their assessment of current and expected conditions edged down. However, four out of every five expect profits will increase over the coming year, with market/demand growth the primary driving force."

"CEOs' expectations regarding the short-term outlook pulled back slightly in the second quarter."

CEOs' assessment of current economic conditions was considerably less favorable. Now, 46% claim conditions are better compared to six months ago, down from 54% in the first quarter.  However, business leaders' sentiment regarding conditions in their own industries edged up slightly, with 48% saying conditions in their own industries have improved, compared with 47% last quarter.

CEOs' expectations regarding the short-term outlook pulled back slightly in the second quarter. Currently, approximately 53% of business leaders anticipate economic conditions will improve over the next six months, down from 60% last quarter. Expectations for their own industries are less upbeat, with 46% of CEOs anticipating an improvement, down from 52% in the first quarter. 

Global Outlook

CEOs are more positive in their assessment of current economic conditions in Europe and Japan, but slightly less positive than last quarter regarding conditions in the United States. Sentiment regarding conditions in India increased the most, but overall remains neutral (a reading of 50). Conditions in China and Brazil remain in negative territory, despite a slight uptick.

Looking ahead, short-term expectations for the United States and Europe edged down slightly. Expectations for China and Japan improved, while sentiment regarding India's short-term outlook surged into positive territory. Expectations for Brazil did not change and remain moderately pessimistic.

Market/Demand Growth Will Drive Profits

Regarding profit expectations over the next 12 months, 80 % of CEOs expect increases. Executives in the durable and non-durable industries are the most optimistic, with about nine out of ten expecting profits to rise. About 76% of CEOs in the service industry expect an increase in profits.

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Among chief executives who expect profits to rise, 56% say market/demand growth will be the primary driving force, while 27% cite cost reductions and an additional 9% each say new technology or price increases will serve as the main source of improvement.


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