CEO Confidence Inches Back Up

New York —The nation's chief executives grew modestly more bullish about the outlook for the U.S. economy during the first quarter of 2005, and The Conference Board's quarterly gauge of CEO confidence inched up to a reading of 62, after falling to a level of 61 during the closing quarter of last year.

The Conference Board canvasses nearly 100 CEOs in a wide variety of industries each quarter, and a reading of more than 50 reflects more positive than negative responses.

CEOs continue to rate the economy as favorable, “and expect little change over the next six months,” said Lynn Franco, director of The Conference Board's Consumer Research Center. “As for the employment outlook, CEOs are not as bullish as last year, and cite health-care costs as the number-one major obstacle to hiring new workers.”

The business think tank's survey shows that CEO's assessment of current conditions improved over the last quarter. About 59 percent said current economic conditions have improved, up from 53 during the fourth quarter of 2004. Assessing the prospects for their own industries, close to 57 percent said business conditions are better this quarter, up from about 46 percent the preceding quarter.

But CEOs more jaundiced view of the short-term outlook “has not changed dramatically,” The Conference Board reported. About 43 percent of business leaders expect economic conditions to improve in the coming months, down from 50 percent last quarter. Expectations for their own industries were also more subdued, with 47 percent anticipating an improvement, down from 52 percent the previous quarter. At the same time, fewer CEOs expect conditions, both economic and in their own industries, to worsen over the next six months.

The jobs outlook also remains muted, The Conference Board reported. About 44 percent said they anticipate an increase in employment levels in their industry, down from 50 percent a year ago. The proportion of CEOs that anticipates a decrease dipped to less than 11 percent from about 12 percent a year ago.

Health-care costs remain the biggest obstacle to hiring new workers, chief executives reported. “Regulation and litigation costs were of less concern, while fringe benefits and wage and salary costs remain of minimal concern to business leaders when hiring new workers,” The Conference Board said.