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CEO Confidence Rises in 2nd Quarter

The Conference Board Measure of CEO Confidence surged to 55 from 30 in the first quarter, and cost reductions are expected to lift profits.

Chief executive officers ended the second quarter with a renewed sense of confidence about their own industries and the economy at large.

Adding to gains registered in the first quarter, The Conference Board Measure of CEO Confidence surged to 55 from 30 in the first quarter. A level of more than 50 indicates more positive than negative responses. The index reached 40 in the third quarter of last year and slumped to 24 in the final three months of 2009.

The percentage of business leaders expecting improvement in economic conditions more than tripled to almost 55 percent in the second quarter from about 17 percent three months ago.

“Ceo’s are considerably more optimistic than last time about the short-term outlook,” said Lynn Franco, director of The Conference Board Consumer Research Center. “However, their assessment of current conditions, while also improved, suggests the economy remains weak.”

Thirty-two percent of the ceo’s surveyed said economic conditions are better than they were six months ago, compared with zero percent in the first quarter. Reflecting on their own industries, 24 percent said conditions have improved during that time span, versus just 1 percent in the first quarter.

During the next 12 months, 46 percent of the respondents expect profit increases. Executives in the durable goods industry were the most optimistic, with 77 percent anticipating higher profits. Executives in the nondurable goods sector were second in profit expectations, with 64 percent anticipating a rise, the Conference Board said.

While 56 percent of ceo’s surveyed believe cost reductions will drive up profits, 33 percent cited market/demand growth as the source of improvement. Ranking third at 7 percent was the belief that new technology will be the driver of growth. The remaining 4 percent cited price increases as the anticipated source of increased profitability.