Are America's optimistic CEOs getting a little carried away?
The Business Roundtable's CEO outlook index hit its highest level on record in the first quarter, the trade group said Wednesday. The 9-year-old index, measuring expected sales, capital spending and hiring trends, hit 113 – a full 7% above than the previous high water mark.
A survey of 142 chief executives showed 92% expect sales to rise in the next six months, and 52% expect to hire workers in the United States. They expect the U.S. economy to expand at a 2.9% clip this year, up from a previous 2.5%.
Execs "see momentum in the economy over the next six months, with increased demand fueling greater investment and job creation," said the group's leader, Verizon (VZ) chief Ivan Seidenberg.
Of course, "increased momentum" is not saying much, as lukewarm as the economy has been. But that CEOs should be highly confident now is no surprise. While U.S. wages have been flat for a decade, CEO pay continues to soar. And as weak as this recovery has been, many of the gains have accrued to big companies. Corporate profits are at a record (see chart, above), for instance.
At the same time, consumers are feeling markedly less confident, as a result of rising food and energy prices and the scarcity of good jobs. Consider the 40-point gap between the CEOs' sales and hiring expectations.
The disparity between CEO and consumer confidence may or may not show that big U.S. companies are decoupling from Main Street. But here is a good sign the CEOs are decoupling from reality: not one executive surveyed in the latest round expects his or her company's sales to fall in the next six months.
Even in the bubbly feel-good days of 2004-2007, every survey had at least one or two execs who admitted to lower sales ahead. But not this time. Score one for irrational exuberance in the catbird seat.
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