“CEOs of small to medium size companies have adjusted to the lean economy, are doing more with less, and have positioned their companies for success. Their continued confidence sends a strong message that small and medium sized businesses will be among those who will lead our overall economic recovery.” –Rafael Pastor, chairman and CEO, Vistage International
Are things getting better out there? Or are storm clouds gathering on the economy’s horizon? That, of course, all depends on who you talk to.
Diane Swonk, chief economist of Chicago-based Mesirow Financial, thinks the economic glass is half full and dropping, to a degree. Her analysis – part of which appears in today’s lead news story – points to a global economy slowly emerging from recession, with the developing world recovering at a much stronger rate than the developed economies, but with all economies still more fragile than anyone cares to admit.
“While the world's economies stagger forward with their recoveries at different rates, in different ways and influenced by different factors, they all have one thing in common: China,” she stressed.
“That country is playing a pivotal role supporting exports throughout the world, and carrying the burden of growth in both the developed and developing economies,” Swonk noted. “A big issue to watch is whether [U.S.] politicians – ahead of the November elections – start posturing to impose tariffs on Chinese imports. This could trigger a more broad-based trade war with Asia and severely limit low-income households’ access to cheap goods, particularly in the U.S.”
One of her big concerns is the Middle East, which in her analysis suffers from a leadership void and an inability to stop the rise in fundamental extremism. “Iraq is only slightly more stable, while tensions between Israel and the Palestinians have worsened,” Swonk said. “Despite continued talks about a two-state solution, a push from surrounding countries for a one-state solution may be gaining momentum.”
Why is all that important to truckers? You can sum it up in two words: oil prices. “Oil prices could move to $100 per barrel by 2012, and higher prices – above $150 per barrel – would constitute a full-blown oil crisis, adding insult to injury for a global economy still struggling to recover,” she warned.
Then there’s the “glass half full” contingent – which, surprisingly, includes chief executives at top U.S. firms.
According to Vistage International's second quarter CEO Confidence Index, CEO confidence is up even amidst talk of a double dip recession. While CEOs of small to medium sized businesses have lowered their expectations for the pace of growth in the overall economy, they remain confident that, over the next twelve months, they will increase revenues and profits, as well as hire new employees, noted the University of Michigan's Dr. Richard Curtin, who’s directed this survey since it got started back in 2003.
He added that CEO confidence rose to 94.4 in Vistage’s second quarterly survey – which polled 1,617 CEOs nationwide from late June to July 2 – marking the sixth consecutive quarterly increase.
[Here’s a clip of Rafael Pastor, Vistage’s chairman and CEO, discussing some of the highlights of the organization’s most recent survey.]
Here are some of the other findings compiled from the firm’s most recent CEO poll:
Employment slowly improves. Planned declines in employment fell to just 9% in the 2nd quarter of 2010, the lowest level in three years. Plans to expand their workforce were reported by 44% of all CEO's in the 2nd quarter survey, unchanged from the prior quarter. Among all firms, however, 47% expected to keep the overall number of employees constant, up from 44% in the prior quarter and the highest percentage in the past decade.
Slow gains in revenues and profits. Growth in revenues was expected by two-thirds of all firms in the 2nd quarter, unchanged from the prior quarter but well above the half of all firms that expected revenue gains a year ago. Rising profits were expected by 54% of all firms in the 2nd quarter of 2010, a level that has remained unchanged over the prior three quarters.
Government does not understand. Most CEOs (87%) believe that the federal government does not understand the challenges faced by small businesses well enough to expand their business opportunities. These CEOs are concerned about increased taxes, regulations, and government intrusions that hinder entrepreneurship.
All of this creates a very complicated big picture for the still-unfolding global economic recovery – and how it all plays out will have a very big impact on the freight world.
