The Ritz Herald
© Michael Nagle

SMB Economic Optimism Falls to Lowest Point since 2016 Presidential Election, Workforce Expansion Outlook Remains Strong

Growing number of CEOs believe economic conditions have worsened and state that attracting qualified talent is the most critical challenge

Published on June 17, 2019

Confidence in the economy among small and midsize businesses CEOs continues to decline, falling to 91.6 in Vistage’s Q1 2019 CEO Confidence Index. The index is down from 95.4 recorded in Q4 2018 and 105.8 in Q1 2018. Despite the continued drop-off and the growing number of CEOs believing the economy has worsened, 59 percent of business leaders plan to increase their workforce and 58 percent anticipate profits to increase. Just 11 percent of firms anticipate declining profits, barely above last quarter’s 10 percent. The fact that 43 percent saw decreases in their tax bill may help profitability expectations.

“Most of the decline was concentrated in assessments of current conditions in the national economy, but future economic prospects remain at the same level as last quarter,” said Dr. Richard Curtin, Research Associate Professor at the University of Michigan’s Institute for Social Research, who analyzed the data. “Although CEOs thought that their firm’s prospects had dimmed, the falloff was much less than the recent plunge in how they viewed overall economic conditions. The critical challenge voiced by nearly half (47%) of all CEOs is attracting qualified additions to their workforce.”

While more than half of CEOs are planning to expand their workforce, three-quarters are hiring now. Of those planning to make hires this year, 31 percent plan to hire in Q2 2019 and 44 percent plan to steadily increase their headcount over the next twelve months. Employee turnover rates are low, with 40 percent of all firms experiencing turnover rates of five percent or less. Investment expenditures are also notable with 41 percent of CEOs voicing planned increases, slightly below last quarter’s 43 percent, but down 10 points from last year’s 51 percent.

“Despite concerns about the current economic conditions and prospects for the future, firms still hold expansive hiring and investment plans, and seven-in-ten CEOs expect revenue gains with more than half anticipating profits to increase,” said Joe Galvin, Vistage’s chief research officer.

Survey highlights include:

Economic Prospects
– Only 29 percent of CEOs report economic conditions had recently improved, down from 44 percent, reported last quarter and 62 percent reported in Q1 2018.
– Just 14 percent of all firms anticipate an improvement in the future growth of the economy.
Data continues to indicate economic uncertainty.

Revenue and Profitability
– 70 percent of firms expect revenue gains, which is unchanged from last quarter, and the lowest level reported in two years.
– Only 7 percent of CEOs anticipate revenue declines over the next 12 months as most of the shift is toward stable revenues.
– 58 percent of CEOs expect profits to increase, compared to 11 percent who are bracing for declining profits.

Hiring and Investment Spending
– 59 percent of CEOs are planning to expand their workforce in the next 12 months.
– 63 percent of respondents state turnover has remained the same over the past twelve months, with 19 percent stating employee turnover has increased, even though the turnover rate remains low.

SOURCE Vistage Worldwide, Inc.
Finance Reporter