Growing Pessimism Dampens CEO Spending Plans, Survey Finds

Compiled By Jill Jusko It likely comes as no surprise to many that CEOs of the fastest growing companies are growing less optimistic about a U.S. economic recovery. Yes, they are more optimistic than they were a year ago, but they have faltered in their beliefs since the second quarter of 2002, shows the latest PricewaterhouseCoopers Trendsetter Barometer. Some 402 CEOs were surveyed in the third quarter for the latest Barometer. Forty-five percent of CEOs surveyed in the second quarter see the U.S. economy as growing; by the third quarter that percentage had tumbled to 24%. Similarly, while 73% of survey respondents in the second quarter were optimistic about economic prospects during the next 12 months, that percentage had dropped to 53% in the third quarter. In other findings:

  • Weak demand was identified as the primary threat to growth, followed by decreasing margins as a distant second and lack of capital for investment. "These business leaders have an ongoing concern about weak demand as a roadblock," says Steve Hamm, managing partner of middle market advisory services for the global professional services firm.
  • The latest revenue-growth projections for calendar 2002 remained steady at 12.7%.
  • Just 38% of executives anticipate making major new investments during the next 12 months, compared with 39% in the previous quarter.
  • Among those planning to increase investment, 34% say they will spend more on IT, 33% on new product development, 20% on facilities expansion, 20% on geographic expansion, 16% on business acquisitions and 15% on research and development.
  • The percentage of respondents planning to hire in the next 12 months dropped to 64% from 66% in the second quarter, but the net additions dropped from 9.6% of the workforce to 7.8% of the workforce.
"Trendsetter CEOs are understandably skittish about committing to workforce expansion or major new investments that will increase capacity," notes Hamm. "If ever there were a time for incentives to spur immediate business spending, it's today."
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