Chief executive officers are upbeat about the economy and many plan to expand their payrolls and investment spending this year, according to The Executive Committee International’s first quarter Confidence Index which was released this month.
The survey asked nearly 1,100 middle-market chief executives about economic trends and issues. Despite The Confidence Index slipping by 1.5 percent during the first quarter of 2004, after posting cumulative gains of 15.6 percent during the previous two quarters, the overall level of confidence continues to indicate that CEOs expect strong economic expansion and higher profits in 2004.
Most significantly, the survey reflected an increase in the number of chief executives who reported improved economic conditions. Three-quarters of those surveyed said that overall economic conditions have improved during the past year, more than twice the number who had favorable views at the start of 2003.
Almost 85 percent of respondents said they plan to hire more full-time employees this year. Much of the expansion will be in sales and marketing departments, with 48 percent of CEOs planning to hire for those positions.
Seventy-two percent of the CEOs expressed confidence in increased profits. For the third consecutive quarter, half said they plan to increase their investment spending in 2004. Half also said they believe the accelerated depreciation tax benefit will affect their business investment this year. This benefit allows the deduction of a greater portion of the cost of depreciable property during the initial years after purchase, rather than spreading the cost evenly over the life of the asset.
Local Executives Mirror National Sentiment
Members of the Colorado Springs Executive Committee who participated in the Confidence Index survey said that they agreed with the overall results.
“I think business nationwide is turning back around,” said Randy Morgan, president and chief executive officer of Westone Laboratories. His company, which has been in business for 45 years, manufactures hearing aids, in-ear music speakers and communication materials for pilots.
“Our core business is with people on fixed incomes,” Morgan said. “Our core production is up 14 percent over last year. Our music monitors are selling well, too. There is more money in the pro tour arena, and more people are going to concerts. In general, I think people are spending more, and more people are letting loose of their discretional dollars.”
Morgan said his company has been expanding and this year will be no exception. “We are hiring in entry-level production through mid-level management,” he said.
Scott Smith, chief executive officer of La Plata Investments, agrees with Morgan’s assessment of the local economy.
“We are not in a boom market,” Smith said, “but we are getting back to a healthy market here in Colorado Springs.”
One reason to be optimistic is that there are 1.3 million to 1.6 million new households in the United States each year, he said.
“The demographics are in place for a household formation pattern,” Smith said. “The baby boomers have the bucks, and we are seeing an unprecedented number of second homes. In addition, there is an intergenerational money transfer going on, which aids economic growth.”
La Plata Investments is the managing development company for the northern El Paso County housing communities of Briargate and Pine Creek.
“The residential market is really picking up,” Smith said. “People can afford more with the low interest rates that are in place now.”
Smith said his company increased employment 10 percent this year.
“I think we’ll see more growth in jobs,” Smith said, “and there will be more opportunities available locally. My responses to the survey questions were really in line with the results from the national survey.”