CEO confidence improves
January 13, 2006
Execs plan to lift prices moderately in '06
Chief executives' confidence, which had declined to 50 in the third quarter, improved to 56 in the final quarter of 2005, The Conference Board reports in its latest survey of CEOs.
The survey includes about 100 business leaders in a wide range of industries. A reading of more than 50 points reflects more positive than negative responses.
"Much of the improvement in confidence can be attributed to the resiliency of the economy post-Katrina and the recent declines in fuel prices," said Lynn Franco, director of The Conference Board Consumer Research Center. "Despite the rebound, CEOs were less confident at the close of 2005 than at the start. Looking ahead, they are cautiously optimistic, but not as optimistic about the short-term outlook as they were at the end of 2004. As for their inflation expectations for 2006, they expect modest increases, about 3.4 percent, much the same as they expected for 2005."
CEOs' assessment of current conditions improved, according to the survey. Now, close to 44 percent of CEOs claim current economic conditions are better, up from 34 percent in the third quarter. In assessing their own industries, business leaders were also more positive than last quarter. About 39 percent say conditions are better, up from 35 percent in the prior survey.
CEOs are more optimistic about the short-term outlook than they were in the third quarter of 2005. Nearly 41 percent of business leaders expect economic conditions to improve in the next six months, up from 34 percent last quarter. Expectations for their own industries were also more positive, with close to 44 percent anticipating an improvement, up from 38 percent last quarter.
The majority of chief executives expect to increase their firms' selling prices in 2006, with 13 percent anticipating price increases in excess of 10 percent. On average, firms plan to hike prices by 3.4 percent, the same as last year. Some 11 percent plan decreases, and 20 percent foresee no change.
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