The Conference Board and PwC Measure of CEO Confidence™, which had increased in the first quarter of 2014, declined slightly in the second quarter. The Measure 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' assessment of current economic conditions was considerably less favorable. Now, 46 percent claim conditions are better compared to six months ago, down from 54 percent in the first quarter. However, business leaders' sentiment regarding conditions in their own industries edged up slightly, with 48 percent saying conditions in their own industries have improved, compared with 47 percent last quarter.
CEOs' expectations regarding the short-term outlook pulled back slightly in the second quarter. Currently, approximately 53 percent of business leaders anticipate economic conditions will improve over the next six months, down from 60 percent last quarter. Expectations for their own industries are less upbeat, with 46 percent of CEOs anticipating an improvement, down from 52 percent 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 percent 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 percent of CEOs in the service industry expect an increase in profits.
Among chief executives who expect profits to rise, 56 percent say market/demand growth will be the primary driving force, while 27 percent cite cost reductions and an additional 9 percent each say new technology or price increases will serve as the main source of improvement.
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