Chief executive officers at small and mid-sized U.S. companies are less optimistic about economic growth than they have been since 2003, a private survey found.
The percentage of CEOs expecting overall economic conditions
to improve the next 12 months decreased to 50 percent in the
first quarter, from 58 percent three months ago, according to the
TEC International survey of nearly 2,100 executives. It’s the
lowest expectations result in the history of the quarterly poll,
which started in the second quarter of 2003. Improvement
expectations have averaged 63.5 percent during that time.
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The U.S. economy grew at a 4.4 percent rate last year and is
forecast to expand 3.6 percent in 2005, according to a Bloomberg
News survey. This year’s projection still exceeds the 3 percent
annual average the past 30 years.
“Most firms expect the economy to make a successful
transition from the more rapid rate of recovery in 2004 to a
slightly slower, but more sustainable and still favorable pace of
expansion,” Richard Curtin, director of consumer surveys at the
University of Michigan and a TEC consultant, said in a statement.
Sixty-three percent of CEOs contacted by San Diego-based TEC
from Feb. 21 to Feb. 25 said overall economic conditions improved
over the past year, the lowest level in 18 months. That compares
with 67 percent last quarter and 74 percent a year ago.
Fifty-four percent of those surveyed expect their company’s
fixed expenditures to increase in the year ahead, down from 57
percent three months ago, the business research group said.
Small to mid-sized companies may be experiencing less
pricing power. Forty-six percent of respondents to the first-quarter survey said they expect to raise prices over the next
year, compared with 49 percent in the fourth quarter of 2004.
“There’s still a tremendous amount of price competition – it’s the Wal-Mart effect,” said Peter Schaffer, CEO of Harrison,
New York-based Case Paper Co. “I’m in a distribution business
and we’re getting a lot of pressure to lower our prices from our
customers, who are receiving the same kind of pressure from their
customers. It makes it hard to be optimistic.”
The TEC survey targets chief executive officers at U.S.
companies with annual sales of $1 million to $1 billion.
Sixty-three percent of survey respondents said they expect
the total number of employees at their company to increase, down
from the record 64 percent in the previous survey, which was
conducted Nov. 17 to Nov. 29. That compares with an average of
52.2 percent since the survey began.
Executives said the biggest impediment to hiring was the
lack of qualified workers.
Fred Frank, chief executive of TalentKeepers Inc., said
companies have been seeing more “churn” in this year’s labor
market as employees gain confidence in the economy and “become
more comfortable switching jobs.” The Orlando, Fla.-based
company specializes in retention consulting.
U.S. employers added 262,000 workers in February, the most
since October, the Labor Department said March 4. The report
suggests companies have greater confidence in the economy. Wages
were unchanged, allaying concern about faster inflation.
“The combination of hiring without wage gains suggests
companies will be able to increase output while maintaining
profitability,” said John Silvia, chief economist at Wachovia
Corp. in Charlotte, N.C.
Most executives, or 69 percent, said they expect
profitability to improve over the next year, compared with 71
percent last quarter.
Bloomberg News
