Concern About Supply-chain Disruption Risk Increases

New study shows that while companies expect revenues to increase, they are worried about supply chain pressures.

The Corporate Executive Board announced an improvement in its quarterly Business Barometer survey as growth expectations boosted the survey. Seventy percent of executives say they expect their companies' revenues to increase, with most (54%) expecting growth in excess of 5% over the next 12 months. While 64% of executives anticipate greater cost pressures in the next 12 months, most (64%) expect just a 1%-4% increase in costs overall.

However executives' concerns about supply-related risks increased substantially. For example, 51% of operations management executives surveyed expect higher supply chain disruption risk, compared to just 37% in Q1 2010.

As was the case last quarter, executives continue to be concerned about increases in cost and supply chain pressures.

  • -- 57% of executives overall expect interest rates to increase, compared to 53% in Q1 2009 and 44% in Q4 2009 who thought the cost of borrowing would rise.
  • -- 73% of HR executives surveyed expect average labor costs in the next year to increase by 1%-4%, with 52% expecting the cost of average health benefits to increase by 1%-9% and 21% expecting more than a 10% increase in such costs.
  • -- 53% of executives overall expect the price of energy commodities to increase in the next 12 months, while 43% expect the price of non-energy commodities to rise as well.

The survey did show signs of confidence as well.

  • --60% of senior executives say consumer confidence will improve, with just 7% saying it will go down, compared to 51% and 14% respectively in Q1 2010.
  • -- 60% of sales executives surveyed believe sales to new customers will increase and 70% believe sales to existing customers will improve.
  • -- 55% of corporate finance executives surveyed expect higher capital expenditures in the next 12 months (compared to 48% in Q1 2010), and 89% say their companies are protecting or increasing R&D expenses (compared to 82% in Q1 2010).
  • -- The share of executives expecting higher competition slightly increased to 52%, compared to 50% in Q1 2010.
  • -- In the next 12 months, 65% of operations management executives surveyed expect to introduce a higher number of new products (compared to just 58% in Q1 2010) and 67% expect to receive more new orders.
  • -- A majority of operations management executives surveyed (64%) also expects expanded production levels in the next 12 months (compared to 59% in Q1 2010), with only 14% indicating they anticipate a decline.
  • -- 45% of senior executives overall think access to credit will improve over the next 12 months while 41% expect no change.

For more information on The Corporate Executive Board Business Barometer, visit http://cebviews.com/economic-outlook/

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