Corporate Executive Board Business Barometer Shows Positive Sentiment Among Senior Executives for First Time Since Crisis

The Corporate Executive Board (NASDAQ: EXBD) (CEB), a leading provider of best practice research and analysis focusing on corporate strategy, operations and management issues, announced today an improvement in its quarterly Business Barometer survey measuring the economic assumptions of nearly 400 senior executives. The Business Barometer provides a unique measure of business sentiment by surveying executives within functional roles across the entire corporate value chain on their outlook for their organizations and a variety of economic factors that can affect future business growth. Currently standing at a reading of 51, compared to 49 in Q1 2010 and 43 in Q4 2009, the Corporate Executive Board Business Barometer shows that sentiment among senior executives about economic outlook for the next 12 months crossed into positive territory for the first time since the crisis.

Improved growth expectations contribute to the latest Business Barometer reading: 70 percent of executives say they expect their companies’ revenues to increase, with most (54 percent) expecting growth in excess of five percent over the next 12 months. While 64 percent of executives anticipate greater cost pressures in the next 12 months, most (64 percent) expect just a one to four percent increase in costs overall.

Out of twelve economic indicators measured by the Business Barometer, executives’ assumptions about consumer confidence showed the greatest sign of positive improvement, an indicator of rising consumer demand. Sixty percent of senior executives say consumer confidence will improve, with just seven percent saying it will go down, compared to 51 percent and 14 percent respectively in Q1 2010.

Although executive confidence in customer demand has improved, executives’ concerns about supply-related risks increased substantially. For example, 51 percent of operations management executives surveyed expect higher supply chain disruption risk, compared to just 37 percent in Q1 2010.

“While modest, the improvement in executive sentiment is a positive sign that confidence in the recovery is growing as business fundamentals continue to improve,” said Oleg Polishchuk, senior director, The Corporate Executive Board.

“With companies sitting on unprecedented levels of liquidity, we anticipate a substantial uptick in business investment (as well as share repurchase and dividend activity) across the next few quarters as executives look to reallocate capital to higher yielding opportunities,” said Michael Griffin, managing director, The Corporate Executive Board. “Even though executives remain cautious, and increasingly concerned with supply-related risks, we expect to see the tide of capital investment begin to shift.”

Indicators of Growth

Once again, The Corporate Executive Board Business Barometer showed signs of future business growth through measured improvements in executives’ outlook on sales, competition, production and access to credit.

• While executives believe sales to existing customers will outpace those to new customers, they are optimistic that both will rise in the next 12 months. Sixty percent of sales executives surveyed believe sales to new customers will increase and 70 percent believe sales to existing customers will improve.
• Fifty five percent of corporate finance executives surveyed expect higher Capital Expenditures in the next 12 months (compared to 48 percent in Q1 2010), and 89 percent say their companies are protecting or increasing R&D expenses (compared to 82 percent in Q1 2010).
• The share of executives expecting higher competition slightly increased to 52 percent, compared to 50 percent in Q1 2010.
• In the next 12 months, 65 percent of operations management executives surveyed expect to introduce a higher number of new products (compared to just 58 percent in Q1 2010) and 67 percent expect to receive more new orders.
• A majority of operations management executives surveyed (64 percent) also expects expanded production levels in the next 12 months (compared to 59 percent in Q1 2010), with only 14 percent indicating they anticipate a decline.
• Forty five percent of senior executives overall think access to credit will improve over the next 12 months while 41 percent expect no change.

Hindering Growth: Signs of Increased Cost and Supply Chain Pressures

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

• Fifty seven percent of executives overall expect interest rates to increase, compared to 53 percent in Q1 2009 and 44 percent in Q4 2009 who thought the cost of borrowing would rise.
• Seventy three percent of HR executives surveyed expect average labor costs in the next year to increase by one to four percent, with 52 percent expecting the cost of average health benefits to increase by one to nine percent and 21 percent expecting more than a 10 percent increase in such costs.
• Fifty three percent of executives overall expect the price of energy commodities to increase in the next 12 months, while 43 percent expect the price of non-energy commodities to rise as well.
• Moreover, 51 percent of operations management executives surveyed expect higher supply chain disruption risk, compared to 37 percent in Q1 2010.

The Corporate Executive Board Business Barometer is a forward-looking diffusion index of expected business conditions, condensed from a survey of more than 380 senior executives in North America and Europe across 33 industries. The Business Barometer provides a unique measure of business sentiment among a representative sample of The Corporate Executive Board’s executive member network. The index measures the assumptions of senior executives across six functional disciplines, including HR, corporate finance, operations, sales and marketing, real estate and IT, on the impact 12 key business and economic indicators will have on their business in the year ahead.

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

About The Corporate Executive Board

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