Executive Confidence Stagnates Under Continued Cost Pressure
Having rebounded in Q1 2012 from its second lowest reading, CEB’s Business Executives’ Sentiment Index (Figure 23) remained below the neutral mark of 50 due to cost pressure concerns.
1. Growth Outlook Improves Marginally in Q2 2012
The percentage of executives anticipating top-line revenue growth in the next 12 months increased marginally from 66% to 69%. Executive expectations about growth at industry peers improved marginally as well: 57% of executives expect higher industry revenues (up from 52% last quarter).
The outlook for new orders improved again with 66% of operations executives now expecting an increase (up from 60% in Q1 2012). In addition, 61% of respondents expect higher production levels in the next 12 months (versus 57% in Q1; Figure 24).
Executive sentiment about consumer confidence improved relative to last quarter. Thirty-eight percent of executives now expect consumer confidence to improve during the next 12 months (up from 31% in Q1). Seventy-one percent of sales executives expect higher sales to new customers (up from 64% in Q1; Figure 25).
2. Cost Concerns Remain Elevated
Seventy-one percent of executives expect cost pressure to increase, up from 68% in Q1 2012.
Expectations for energy costs, in particular, worsened. Sixty-four percent believe energy costs will be higher (compared to 57% last quarter).
Expectations for core input prices also deteriorated (68% expect higher inputs prices versus 61% last quarter).
Budget outlooks remain tight. More finance executives (40%) expect general and administrative expenses to shrink in the next year than those (39%) who expect them to grow. Fewer executives expect higher budgets in Finance, Marketing (Figure 26) and HR.
3. Investment Expectations Improve, but Hiring Outlook Remains Weak
Only 38% of executives expect total headcount to increase (versus 36% last quarter). A full 32% of executives expect lower headcount in the next 12 months.
Expectations for higher investments improved only marginally. Forty-nine percent of executives expect to increase capital expenditures (up from 47% in Q1 2012). Forty-two percent of executives expect greater R&D expenditures in the next 12 months, a marginal change from Q1 2012 (Figure 27).
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