Category Archives: Business

CEO Confidence Surveys 2Q 2017 – Notable Excerpts

On July 6, 2017, The Conference Board released the 2nd Quarter Measure Of CEO Confidence.   The overall measure of CEO Confidence was at 61, down from 68 in the first quarter. [note:  a reading of more than 50 points reflects more positive than negative responses]

Notable excerpts from this July 6 Press Release include:

CEOs’ appraisal of current economic conditions waned, with 60 percent saying conditions were better compared to six months ago, down from 71 percent in the first quarter. Business leaders were also less positive in their appraisal of current conditions in their own industries. Now, just 47 percent say conditions in their own industries have improved, down from 60 percent last quarter.

Looking ahead, CEOs’ optimism regarding the short-term outlook for the economy moderated due to a greater percentage expressing a “more of the same” sentiment as opposed to foreseeing conditions worsening. Currently, 41 percent expect economic conditions to improve over the next six months, compared to approximately 65 percent last quarter. The outlook for their own industries was also less favorable, with 48 percent of CEOs anticipating an improvement over the next six months, down from 67 percent in the first quarter of this year.

The Business Roundtable last month also released its CEO Economic Outlook Survey for the 2nd Quarter of 2017.   Notable excerpts from the June 6, 2017 release, titled “Survey:  America’s Business Leaders Maintaining Confidence in U.S. Economy“:

The Business Roundtable CEO Economic Outlook Index — a composite of CEO
plans for capital spending and hiring and projections for sales over the next six months —
reached its highest level in three years, since the second quarter of 2014 (95.4). The Index
stood at 93.9 in the second quarter of 2017, up from 93.3 in the first quarter. For the
second quarter in a row, the Index stands well above its historical average of 80.0.

CEO plans for capital investment rose by 4.6 points from the last quarter, while
expectations for sales stayed steady, increasing by 0.5 point. Plans for hiring for the next
six months dropped a modest 3.3 points.

CEOs project 2.0 percent GDP growth in 2017, down two-tenths from their projection for
2017 made in March.

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2427.43 as this post is written

June 2017 Duke/CFO Global Business Outlook Survey – Notable Excerpts

On June 13, 2017 the June Duke/CFO Global Business Outlook was released.  It contains a variety of statistics regarding how CFOs view business and economic conditions.

In this CFO survey, I found the following to be the most notable excerpts – although I don’t necessarily agree with them:

Uncertainty about regulatory policy and health care costs is causing chief financial officers in the United States to hold back investment plans, a new survey finds.

also:

The survey has been conducted for 85 consecutive quarters and spans the globe, making it the world’s longest-running and most comprehensive research on senior finance executives. This quarter, nearly 750 CFOs responded to the survey, which ended June 9. Results are for the U.S. unless stated otherwise.

Almost 40 percent of CFOs indicated uncertainty is currently higher than normal. Among those companies, about 60 percent said that uncertainty has caused them to delay new projects and investments.

also:

The Optimism Index fell slightly this quarter to 67 on a 100-point scale. That’s two points lower than last quarter but still far above the long-run average of 60.

“CFOs remain optimistic not only about the overall economy but about their own firms too,” Graham said. “Our analysis of past results shows the CFO Optimism Index is an excellent predictor of the future, especially hiring plans and overall GDP growth.”

Hiring plans are stronger than one year ago and U.S. companies expect to pay higher wages, with median wage growth of about 3 percent over the next 12 months, even greater in the construction and tech industries.

The CFO survey contains two Optimism Index charts, with the bottom chart showing U.S. Optimism (with regard to the economy) at 67, as seen below:

Duke CFO Survey Optimism chart

It should be interesting to see how well the CFOs predict business and economic conditions going forward.   I discussed past various aspects of this, and the importance of these predictions, in the July 9, 2010 post titled “The Business Environment”.

(past posts on CEO and CFO surveys can be found under the “CFO and CEO Confidence” tag)

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2428.11 as this post is written

Deloitte “CFO Signals” Report Q2 2017 – Notable Aspects

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 2nd Quarter of 2017.

As seen in page 2 of the report, there were 132 survey respondents.  As stated:  “Each quarter (since 2Q10), CFO Signals has tracked the thinking and actions of CFOs representing many of North America’s largest and most influential companies.

All respondents are CFOs from the US, Canada, and Mexico, and the vast majority are from companies with more than $1 billion in annual revenue. For a summary of this quarter’s response demographics, please see the sidebars and charts on this page. For other information about participation and methodology, please contact nacfosurvey@deloitte.com.”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, Chinese, and European economies? Perceptions of North America declined slightly, with 65% of CFOs rating current conditions as good (near the four-year high) and 58% expecting better conditions in a year. Perceptions of Europe improved to 17% and 30%, while China rose strongly to 28% and 32%. Page 6.

What is your perception of the capital markets? Eighty-five percent of CFOs say debt financing is attractive (up from 81% last quarter), while attractiveness of equity financing held steady for public company CFOs (at 42%) and rose for private company CFOs (from 38% to 46%). Seventy-eight percent of CFOs now say US equities are overvalued—just below last quarter’s survey high. Page 7.

Expectations

What is your company’s business focus for the next year? CFOs indicate a strong bias toward revenue growth over cost reduction (63% vs. 18%), and investing cash over returning it (62% vs. 16%). They shifted back to a bias toward existing offerings over new ones (46% vs. 32%), and again increased their bias toward current geographies over new ones (72% vs. 14%). Page 10.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations rose from 4.3% to 5.6% and are above their two-year average. Earnings growth rose to 8.7%, up from 7.3% and well above the two-year average. Capital spending growth, which skyrocketed last quarter, slipped from 10.5% to a still high 9.0%. Domestic hiring growth held steady at 2.1%. Page 11.

from page 9:

Sentiment

Coming off a survey high last quarter, own-company optimism remains strong on very high optimism in the US and Mexico; Manufacturing and Services are high, and Energy/Resources rebounded.

This quarter’s net optimism declined from last quarter’s survey-high +50 to a still-high +44. Nearly 55% of CFOs expressed rising optimism (down from 60%), and 11% cited declining optimism (up from 10%).

Net optimism for the US declined from last quarter’s +58 to +47 this quarter. Canada fell from +40 to +20, while optimism in Mexico bounced back very strongly from -71 to +50.

Manufacturing and Services are again above +50, while Energy/Resources rose significantly to +47. Technology and Financial Services declined significantly, but both are still strong by historical standards. T/M/E is negative, but the sample size is very low this quarter.

Please see the full-detail report for charts specific to individual industries and countries.

from page 11:

Expectations

Key growth metrics remain relatively strong, bolstered by Canada and Mexico; the outlook for Energy/Resources and Healthcare/Pharma improved significantly.

Revenue growth expectations rose from 4.3% to 5.6% and are above their two-year average. US expectations continued to rise. Canada rose to a five-year high and Mexico bounced back from a two-year low. Energy/Resources rose to its survey high, and Healthcare/Pharma bounced back from last quarter’s survey low.

Earnings growth expectations are up to 8.7% from last quarter’s 7.3% and hit a twoyear high. All geographies improved significantly. Manufacturing is at its highest level in two years; Healthcare/Pharma bounced back strongly from last quarter’s three-year low.

Capital investment growth expectations fell to 9.0% from 10.5%, but still sit at their secondhighest level in five years. Canada and Mexico nearly doubled, but US expectations fell. Energy/Resources is again near its survey high. Healthcare/Pharma and Services are both up sharply; Technology declined significantly.

Domestic hiring growth held steady at 2.1%.  Canada bounced back from last quarter, and the US declined slightly. Healthcare/Pharma is highest of the industries, with Manufacturing the lowest (despite sitting near its two-year high).

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” on page 9 and “Economic Optimism” found on page 6.

_____

I post various business and economic surveys because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2435.61 as this post is written

NFIB Small Business Optimism – May 2017

The May NFIB Small Business Optimism report was released today, June 13, 2017. The headline of the Small Business Economic Trends report is “Small Business Optimism Continues Remarkable Surge.”

The Index of Small Business Optimism was unchanged in May at 104.5.

Here are some excerpts that I find particularly notable (but don’t necessarily agree with):

“The remarkable surge in optimism that began last year right after the election shows no signs of slowing down” said NFIB President and CEO Juanita Duggan. “Small business owners are highly encouraged by the President’s regulatory reform agenda, and they remain optimistic there will be tax reform and health-care reform. This is a policy-driven phenomenon.”

The Index for May matched its strong performance in April of 104.5. That means the Index has been at a historically high level for six straight months. Five of the Index components posted a gain, four declined, and one remained unchanged.

also:

A strong majority of owners, 59 percent, reported hiring or trying to hire in May, although 51 percent said they found few or no qualified workers. Remarkably, that was a problem for 86 percent of owners who said they tried to hire. Nineteen percent of all owners in the survey said finding qualified workers was their top concern, making it the second-biggest problem for small business.

“The tight labor market has been a persistent problem for small business owners for the past several months, and the problem appears to be getting worse,” said NFIB Chief Economist Bill Dunkelberg. “It’s forcing small business owners to increase compensation, which we’re seeing in this data, to attract new workers and keep the ones they have. But it also means a lot of small business owners are short-handed. They can’t keep up with customer demand because the labor pool isn’t producing enough qualified workers. It’s a significant structural problem in the economy that policymakers will have to watch.”

Twenty-eight percent reported plans to make capital outlays, a one-point gain from April but well below historical levels for periods of growth.

also:

Credit Markets

Only 3 percent of owners reported that all their borrowing needs were not satisfied, unchanged and historically very low. Thirty-one percent reported all credit needs met (down 1 point), and 51 percent explicitly said they did not want a loan. Only 1 percent reported that financing was their top business problem compared to 22 percent citing taxes, 19 percent citing the availability of qualified labor, and 13 percent regulations and red tape. Twenty-eight percent of all owners reported borrowing on a regular basis (down 3 points). The average rate paid on short maturity loans was up 50 basis points to 5.9 percent.

Here is a chart of the NFIB Small Business Optimism chart, as seen in the June 13 Doug Short post titled “NFIB Small Business Survey:  Index Continues Surge in May“:

NFIB Small Business Optimism Index

Further details regarding small business conditions can be seen in the full May 2017 NFIB Small Business Economic Trends (pdf) report.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2439.33 as this post is written

Corporate Profits As A Percentage Of GDP

In the last post (“1st Quarter 2017 Corporate Profits“) I displayed, for reference purposes, a long-term chart depicting Corporate Profits After Tax.

There are many ways to view this measure, both on an absolute as well as relative basis.

One relative measure is viewing Corporate Profits as a Percentage of GDP.  I feel that this metric is important for a variety of reasons.  As well, the measure is important to a variety of parties, including investors, businesses, and government policy makers.

As one can see from the long-term chart below (updated through the first quarter), (After Tax) Corporate Profits as a Percentage of GDP is at levels that can be seen as historically (very) high.  While there are many reasons as to why this is so, from a going-forward standpoint I think it is important to recognize both that such a notable condition exists, as well as contemplate and/or plan for such factors and conditions that would come about if (and in my opinion “when”) a more historically “normal” ratio of Corporate Profits as a Percentage of GDP occurs.  This topic can be very complex in nature, and depends upon myriad factors.  In my opinion it deserves far greater recognition.

(click on chart to enlarge image)

CP:GDP

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 26, 2017

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2414.55 as this post is written

1st Quarter 2017 Corporate Profits

Today’s (May 26, 2017) GDP release (Q1, 2nd Estimate)(pdf) was accompanied by the BLS Corporate Profits report for the 1st Quarter.

Of course, there are many ways to adjust and depict overall Corporate Profits.  For reference purposes, here is a chart from the St. Louis Federal Reserve (FRED) showing the Corporate Profits After Tax (without IVA and CCAdj) (last updated May 26, 2017, with a value of $1735.8 Billion SAAR):

Corporate Profits After Tax

Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective:

Corporate Profits After Tax Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Corporate Profits After Tax [CP]; U.S. Department of Commerce: Bureau of Economic Analysis; accessed May 26, 2017; https://research.stlouisfed.org/fred2/series/CP

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2415.16 as this post is written

CEO Confidence Surveys 1Q 2017 – Notable Excerpts

On April 6, 2017, The Conference Board released the 1st Quarter Measure Of CEO Confidence.   The overall measure of CEO Confidence was at 68, up from 65 in the fourth quarter. [note:  a reading of more than 50 points reflects more positive than negative responses]

Notable excerpts from this April 6 Press Release include:

CEOs’ assessment of current economic conditions improved further, with 71 percent saying conditions were better compared to six months ago, up from 59 percent in the final quarter of 2016. Business leaders were also considerably more positive in their assessment of current conditions in their own industries. Now, 60 percent state conditions in their own industries have improved versus 46 percent in the fourth quarter.

CEOs’ optimism regarding the short-term outlook for the economy eased slightly, but remains rather strong. Currently, 65 percent expect economic conditions to improve over the next six months, compared to approximately 67 percent last quarter. The outlook for their own industries, however, was more favorable, with 67 percent of CEOs anticipating an improvement over the next six months, up from 58 percent in the fourth quarter of 2016.

The Business Roundtable last month also released its CEO Economic Outlook Survey for the 1st Quarter of 2017.   Notable excerpts from the March 14, 2017 release, titled “Business Leaders Positive on Economy:  Expectations for Sales, Hiring & Investment Make Sharp Rise“:

The Business Roundtable CEO Economic Outlook Index — a composite of CEO projections for sales and plans for capital spending and hiring over the next six months — made its largest increase since the fourth quarter of 2009.

The Index jumped 19.1 points, from 74.2 in the fourth quarter of last year to 93.3 in the current quarter. For the first time in seven quarters, the Index has risen above its historical average of 79.8. Its highest level over the past 10 years was 113, reached in Q1 2011.

CEO plans for hiring increased by 18 points from the previous quarter, while expectations for sales and capital expenditures increased by 21 and 18.4 points, respectively, over the previous quarter.

CEOs project 2.2 percent GDP growth in 2017, a 0.2 percent increase over their projection for 2017 made last December.

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2359.47 as this post is written

Corporate Profits As A Percentage Of GDP

In the last post (“4th Quarter 2016 Corporate Profits“) I displayed, for reference purposes, a long-term chart depicting Corporate Profits After Tax.

There are many ways to view this measure, both on an absolute as well as relative basis.

One relative measure is viewing Corporate Profits as a Percentage of GDP.  I feel that this metric is important for a variety of reasons.  As well, the measure is important to a variety of parties, including investors, businesses, and government policy makers.

As one can see from the long-term chart below (updated through the fourth quarter), (After Tax) Corporate Profits as a Percentage of GDP is at levels that can be seen as historically (very) high.  While there are many reasons as to why this is so, from a going-forward standpoint I think it is important to recognize both that such a notable condition exists, as well as contemplate and/or plan for such factors and conditions that would come about if (and in my opinion “when”) a more historically “normal” ratio of Corporate Profits as a Percentage of GDP occurs.  This topic can be very complex in nature, and depends upon myriad factors.  In my opinion it deserves far greater recognition.

(click on chart to enlarge image)

Corporate Profits as a Percentage of GDP

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 30, 2017

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2369.94 as this post is written

4th Quarter 2016 Corporate Profits

Today’s (March 30, 2017) GDP release (Q4, 3rd Estimate)(pdf) was accompanied by the BLS Corporate Profits report for the 4th Quarter.

Of course, there are many ways to adjust and depict overall Corporate Profits.  For reference purposes, here is a chart from the St. Louis Federal Reserve (FRED) showing the Corporate Profits After Tax (without IVA and CCAdj) (last updated March 30, 2017, with a value of $1741.2 Billion):

CP_3-30-17

Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective:

CP percent change from year ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Corporate Profits After Tax [CP]; U.S. Department of Commerce: Bureau of Economic Analysis; accessed March 30, 2017; https://research.stlouisfed.org/fred2/series/CP

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2364.90 as this post is written

Deloitte “CFO Signals” Report Q1 2017 – Notable Aspects

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 1st Quarter of 2017.

As seen in page 2 of the report, there were 132 survey respondents.  As stated:  “Each quarter (since 2Q10), CFO Signals has tracked the thinking and actions of CFOs representing many of North America’s largest and most influential companies. All respondents are CFOs from the US, Canada, and Mexico, and the vast majority are from companies with more than $1 billion in annual revenue. For a summary of this quarter’s response demographics, please see the sidebars and charts on this page. For other information about participation and methodology, please contact nacfosurvey@deloitte.com.”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, Chinese, and European economies? Perceptions of the North American economy improved again, with 66% of CFOs rating current conditions as good (a four-year high) and 62% expecting better conditions in a year. Perceptions of Europe improved to 12% and 28%, while China rose to 20% and 19%. Page 6.

What is your perception of the capital markets? Eighty-one percent of CFOs say debt financing is attractive (up slightly from 79% last quarter), while attractiveness of equity financing held steady for public company CFOs (at about 40%) and rose for private company CFOs (from 29% to 38%). Eighty percent of CFOs now say US equities are overvalued—a new survey high. Page 7.

Sentiment

Compared to three months ago, how do you feel about the financial prospects for your company? Net optimism rose sharply from last quarter’s +23.4 to +50.0 (a survey high). About 60% of CFOs express rising optimism (up from 43%), and those citing declining optimism fell from 20% to 10%. Page 8.

Expectations

What is your company’s business focus for the next year? CFOs indicate a strong bias toward revenue growth over cost reduction (60% vs. 18%), and investing cash over returning it (59% vs. 15%). They shifted to a bias toward new offerings over existing ones (42% vs. 38%), and markedly increased their bias toward current geographies over new ones (67% vs. 13%). Page 9.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations rose from 3.7% to 4.3% and are slightly above their two-year average. Earnings growth rose to 7.3%, up from 6.4% and also above the two-year average. Capital spending growth skyrocketed from 3.6% to 10.5% (the highest level in almost five years). Domestic hiring growth rose from 1.3% to 2.1%. Page 10.

from page 8:

Sentiment

Net optimism—already fairly strong since 2Q16—rose sharply to a new survey high amid overwhelmingly positive sentiment among US CFOs.

This quarter’s net optimism spiked to a survey high +50. Nearly 60% of CFOs expressed rising optimism (up from 43% last quarter), and about 10% cited declining optimism (down from 20%).

Net optimism for the US rose sharply from last quarter’s already-strong +34 to +58 this quarter. Canada rose from +7 to +40, while optimism in Mexico slid from -64 to -71.

Healthcare/Pharma and Energy/Resources CFOs were among the most optimistic last quarter, but are among the least optimistic this quarter (joined by Retail/Wholesale). Financial Services CFOs were among the least optimistic last quarter, but are among the most optimistic this quarter, joined by Technology and Telecom/Media/Entertainment (T/M/E).

from page 10:

Expectations

All key growth metrics rose this quarter, with capital spending skyrocketing; the outlook for Healthcare/Pharma declined markedly, but the outlook for Manufacturing and Energy/Resources improved.

Revenue growth expectations rose to 4.3% and are slightly above their two-year average. US expectations rebounded from last quarter’s dismal level, while Mexico fell to a two-year low. Energy/Resources is near its two-year high, and Healthcare/Pharma fell to its survey low.

Earnings growth expectations of 7.3% are up significantly from last quarter and above their two-year average. The US improved, but Mexico declined again. Manufacturing is highest, hitting its highest level in two years; Healthcare/Pharma fell to its lowest level in more than three years.

Capital investment growth expectations of 10.5% are up drastically from last quarter and sit at their highest level in nearly five years. All countries improved significantly from last quarter. Manufacturing and Energy/Resources rose sharply, with both near their survey highs.

Domestic hiring growth rose from last quarter’s weak showing of 1.3% to 2.1% and is at its second-highest level in nearly two years. Canada is low, but up from last quarter. Manufacturing sits at a two-year high, but is lowest of the industries (despite strength in other metrics).

Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” on page 8 and “Economic Optimism” found on page 6.

_____

I post various business and economic surveys because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2352.66. as this post is written