CEO Economic Confidence Remains Positive, But Pace Slows

Chief executives of small and mid-sized businesses say the overall U.S. economy continues to improve, but its torrid pace of growth will slow during the second half of 2006, according to the Vistage quarterly CEO survey, the Vistage Confidence Index. With this positive economic outlook, CEOs still find hiring and retaining good people a more immediate concern than addressing rising energy costs or proposed immigration reform.

The Vistage Confidence Index fell to 97.8 in Q2, 2006, down nearly seven points from the vigorous 104.2 established in Q1. More than 1,800 CEO members of Vistage International, the world's largest CEO membership organization, responded to the Q2 survey.

"Firms anticipate the economy is slowing from its robust pace, but it will continue to remain positive," said Richard Curtin, Ph.D., a consultant for the Vistage Confidence Index and director of consumer surveys at the University of Michigan. "Overall, firms point to a continued economic expansion amid tight labor markets and heightened cost pressures."

"A nearly equal number of firms expect conditions to improve as to worsen in the next 12 months, in sharp contrast to a year ago when three times as many firms expected a faster, rather than a slower rate of economic growth," said Dan Barnett, Chief Operating Officer of Vistage International.

Staffing Remains #1 Concern for CEOs

The hiring and retaining of qualified, trained employees continues to be the most pressing concern for American CEOs. Although nearly six out of ten CEOs expect to hire additional employees in the next twelve months, on pace with the Index results from last year, a tighter labor market is causing CEOs to worry more about staffing than rising energy and capital costs.

Growth, Revenue and Profits

Although firms are less confident about the economy than one year ago, they remain positive about the growth of their business and 78 percent expect revenues to grow. According to Barnett, "Business growth is driven by more than the strength of the U.S. economy. Seventy percent of firms say they are conducting business outside the U.S., one reason why companies see healthy growth ahead."

Energy

Rising energy prices are not the most significant issue among CEO's, with only nine percent listing it as such. Thirty percent of businesses are absorbing the growing energy costs and another 27 percent are increasing prices to customers as a result of increased energy costs.

Avian Flu Fears

Concerns about an avian flu pandemic continue to be a concern for CEOs, but the business implications have yet to affect economic confidence. Seventy-three percent of CEOs are taking no action in response to the growing international concern.

Pending Legislation on Immigration Not an Issue