"The findings from our latest Business Barometer show that companies are turning a corner in their hiring and investment plans amidst renewed confidence in the health of consumers and an improved outlook for industrialized economies such as the U.S. and Europe," said Michael Griffin, executive director, Global Research for the Finance, Strategy and Legal Practice at CEB. "For the first time since the introduction of this survey, we saw a dramatic increase in the number of executives planning to increase capital expenditures. Moreover, for the first time a majority of senior executives expect their firms to increase overall headcount."
Indicators of Growth
One of the most significant improvements in the Q1 Business Barometer was senior executives' sentiment regarding consumer confidence, with 56 percent of senior executives expecting consumer confidence to improve (compared to 39 percent in Q4 2010 and 38 percent in Q3 2010). This quarter's survey also saw a significant improvement in sentiment among executives about their companies' hiring practices, with 58 percent of senior executives expecting overall staff headcount to grow in the next twelve months (compared to 50 percent in Q4 2010).
Findings from CEB's Business Barometer showed that 70 percent of senior executives expect CAPEX to increase (up from 52 percent in Q4 2010), the highest number since the index began in the last quarter of 2009.
Additional notable findings from CEB's Q1 2011 Business Barometer include:
•Growth prospects in the U.S. and E.U. improved dramatically, with 50 percent of executives seeing stronger economic growth in these industrialized economies (compared to 32 percent in Q4 2010 and Q3 2010).
•The percentage of executives expecting an increase in R&D spending increased to 56 percent, compared to 43 percent in Q4 2010.
•In the next twelve months, 57 percent of executives expect more M&A deals, up from 53 percent in Q4 2010.
•Sixty-six percent of surveyed executives expect to introduce a higher number of new products (compared to 53 percent in Q4 2010) and 94 percent expect to maintain or somewhat increase existing capacity levels (compared to 45 percent in Q4 2010).
Areas of Vigilance
Despite the improved growth outlook, the Q1 Business Barometer indicated that companies continue to face a challenging cost environment. Eighty-four percent of senior executives surveyed expect higher costs of core inputs in the next 12 months (compared to 74 percent in Q4 2010), the highest reading since the start of the index.
•Specifically, the survey found that: ninety-eight percent of senior executives surveyed expect the cost of energy and non-energy related commodities to either remain at current levels or grow even higher.
•Forty-nine percent of executives surveyed expect to see easier access to credit while 41 percent expect no change (compared to 45 percent and 39 percent respectively in Q4 2010).
•In the next twelve months, 48 percent of executives surveyed expect to operate in a higher interest rate environment (compared to 42 percent in Q4 2010).
•Seventy-eight percent of senior executives expect higher labor costs (compared to 77 percent in Q4 2010).