Business Confidence Climbing
The confidence of U.S. chief executives increased in the second quarter to the highest level in a year, reflecting a rising outlook for corporate earnings, a new survey showed.
A separate survey of corporate chief information officers showed an improvement in expectations for spending on computers, software and related equipment this year.
The New York-based Conference Board on Monday said its business confidence index rose to 60 in the quarter ended June 30, up from a first-quarter reading of 53 -- which had been the lowest since the fourth quarter of 2001.
The index is based on a survey of 100 CEOs at major U.S. companies.
About 65% of the executives surveyed said they expected their earnings to rise in the second half.
“Growing optimism about profits suggests stronger corporate performance ahead,” said Lynn Franco, director of the Conference Board’s consumer research center.
But there were wide disparities in profit expectations among industries.
About 67% of executives in the services industry expected profit increases. Among manufacturers of durable goods such as appliances, 77% expected higher earnings. But just 44% of manufacturers of nondurable goods expected earnings to improve.
Of CEOs projecting higher earnings, about 37% cited cost cuts as key to better results, while 28% expected better demand. Just 8% looked for higher profits through price increases.
The Conference Board’s index measuring executives’ expectations over the next six months rose to 66 from 60 in the first quarter. An index measuring current economic conditions rose to 55 from 40.
Also Monday, brokerage firm Goldman Sachs Group said its latest survey of corporate chief information officers showed that they expect overall spending on computers, software and related equipment to be about flat this year, an improvement from a predicted decline of 3.2% in an April survey.
Executives in charge of information systems forecast their spending to fall an average of 0.4% this year. They also estimated a 3.5% rise in overall capital budgets in 2004, according to the survey, which includes as many as 100 executives.
“Although much of the rebound is simply a bounce from the highly depressed results of our April survey, there are indications that the second-half spending outlook has improved somewhat,” Goldman analysts Laura Conigliaro and Rick Sherlund wrote to clients.
Computer-related business spending is about half the level it was during the dot-com boom in the late 1990s, and many companies have delayed projects such as replacing personal computers and software.
