CEO confidence experienced the largest quarterly gain in the fourth quarter of 2011 at 98.8, up from 83.5 in the third quarter, according to the Vistage CEO Confidence Index.
Because of the boost, the index finds that CEOs are planning increases in employment and fixed investments as they expect higher revenues and profits in 2012. Still, economic and political uncertainty remains the largest concern, which was reported by nearly half of all CEOs. The concern is based on the debt crisis in Europe and the failure of Congress to address the national debt. In fact, two-thirds of respondents say the national debt had negatively impacted their business plans.
Given the increased confidence, 49 percent of respondents say the U.S. will be the most improved economy in the world within three years. Seventeen percent of respondents ranked China as the most improved, and 14 percent of respondent believe South America will be the most improved.
“This is not the opinion of pundits or economists,” says Rafael Pastor, Vistage chairman and CEO. “These are the CEOs who are leading our economic recovery and will be responsible for improving the business and employment picture in the U.S. over the next three years. This is a good sign of better days ahead. Basically, these CEOs are saying that, despite the stalemates in Washington and the volatility around the world, they and their enterprises will innovate, grow and hire in the ways the rest of the world can’t.”
The index also reveals that at least twice as many CEOs believe the economy had improved in the latest survey compared with one quarter ago. Better economic conditions were reported by 41 percent in the fourth quarter, a jump from 18 percent in the 3rd quarter. Another 12 percent of respondents thought the economy had recently declined.
Forty percent of respondents expect additional economic gains, which is double from the 20 percent recorded in the 3rd quarter. Although CEOs are less optimistic than they were in the closing quarter of 2010, the data signal an improved fourth quarter with modest positive growth in 2012.
According to the index, net increases in employment were planned by 55 percent of respondents in the 4th quarter of 2011. While that is just slightly higher than the previous 54 percent, it was the highest percent that anticipated job additions since 2007. Only 6 percent planned net job declines in 2012, which is barely above the record low of 5 percent.
Respondents were split regarding whether the recent sharp decline in unemployment suggested a sustained trend or a temporary problem. For Congress to create more jobs, 33 percent of respondents say to make the current tax cuts permanent, followed by provide employers with hiring incentives at 17 percent and increase spending on infrastructure at 14 percent.