"Despite the dip in overall confidence, CEOs are very upbeat about the outlook for the next six months"
Lynn Franco, Director of The Conference Board’s Consumer Research Center

Chief executives’ confidence in the nation’s economy, which surged to 73 in the first quarter of 2004, dipped to 70 in the second quarter, The Conference Board reports. A reading of more than 50 points reflects more positive than negative responses.

The Conference Board’s quarterly measure of CEO Confidence covers more than 100 CEOs in a wide variety of industries.

"Despite the dip in overall confidence, CEOs are very upbeat about the outlook for the next six months," says Lynn Franco, Director of The Conference Board’s Consumer Research Center. "Profit expectations are much improved from a year ago and the majority of business leaders cite an increase in market demand as the main impetus."

CEOs’ overall assessment of current conditions remained positive in the second quarter of 2004, with the measure of current economic conditions holding steady at 78. More than 90 percent of CEOs claim current economic conditions have improved, the same as last quarter. In assessing their own industries, the measure edged up to 72 from 71. More than 70 percent say conditions are better now compared to six months ago.

In looking ahead to the next six months, CEOs’ expectations were more subdued than last quarter, but still positive. Business leaders’ outlook for the economy dipped to 68 from 72. Their expectations for their own industries also posted a decline, with the measure slipping to 65 from 70.

Profit Expectations Better Than Last Year

About 88 percent of chief executives expect profits to rise, up from a year-ago reading of 65 percent. But there are differences among and within industries. About 84 percent of executives in the services industry expect profit increases. But among manufacturers, those in the durable goods industry (100 percent expect profits to rise) were more optimistic than those in the non-durable sector (85 percent see profits rising).

Among executives who expect profits to advance, 60 percent cite increases in market/demand growth to be the key reason. About 25 percent cite cost reductions. Seven percent of CEOs believe technology will be the main source of profit growth, and the remaining 8 percent believe price increases will boost profits.

Source: CEO Confidence Survey, 2nd Quarter 2004.