Small and Midsize Business Confidence Climbs for Fourth Consecutive Quarter, Fueling Anticipation for 2025 Growth Cycle
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SAN DIEGO, April 16, 2024 ~ According to the latest CEO Confidence Index from Vistage, a CEO coaching and peer advisory organization, small and midsize business (SMB) CEOs' confidence in the economy has continued to rise in the first quarter of 2024. This marks the fourth consecutive quarter of increased confidence, indicating sustained growth in economic optimism.

The Vistage CEO Confidence Index saw a significant surge of nearly four points to 85.9 in Q1 2024, maintaining its steady climb from 82 in Q4 2023, 76 in Q3 2023, 74.2 in Q2 2023, and 72.6 in Q1 2023.

Joe Galvin, Vistage's chief research officer, compared the economy's recovery to that of an athlete undergoing rigorous rehabilitation after sustaining serious injuries. He stated that there has been a notable improvement in economic sentiment, which has been a key driver behind the surging Vistage CEO Confidence Index. While expectations for revenue and profits have remained stable compared to the previous quarter, there has been a slight increase in investment for expansion initiatives. However, this is tempered by a decline in intentions to hire. Galvin expressed cautious optimism that we are slowly inching towards a growth cycle in 2025.

Since 2003, Vistage has been measuring SMB CEOs' sentiment on various economic and business factors each quarter. According to ITR Economics' rate-of-change methodology, the Vistage CEO Confidence Index is a leading indicator of the U.S. Industrial Production Index nine months in advance.

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Jackie Greene, Vice President of Economics at ITR Economics, cautioned against interpreting the rise in the Vistage CEO Confidence Index level as an outright positive sign for the overall economy. She pointed out that while it has climbed to 85.9, this level mirrors recessionary lows recorded by Vistage before the pandemic. She emphasized the importance of looking at the more complete picture captured by Vistage's Index over the last 20+ years.

The highlights of the Q1 2024 Vistage CEO Confidence Index include CEOs facing mounting pressure on wages as hiring plans slow down. Only 51% of SMB CEOs plan to increase hiring in the year ahead, which is a decrease of five percentage points from last quarter and below last year's 54%. Of those planning to expand their workforce, only 6% report hiring plans for Q1 2024, while 28% have plans for Q2 2024, 19% for Q3 2024, and 4% for Q4 2024. However, a majority of CEOs (42%) plan to hire steadily throughout the next 12 months. On the other hand, there has been an increase in the number of CEOs (10%) planning to decrease their workforce in the coming year.

The majority of CEOs (65%) report labor as the biggest source of inflation currently impacting their business. In response to increased costs, more than half of CEOs (51%) plan to increase prices for their product or service in the coming year, which is slightly below last quarter's figure of 54%.

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CEOs are increasingly optimistic about the economy, with 26% reporting that it has improved in the past year (up from 20% last quarter). This is a significant improvement from a year ago when 58% said that it had worsened. Additionally, 26% expect further improvement in the economy in the next year (up from 21% last quarter and a gain of 13 percentage points since Q3 2023). Only 21% expect it to worsen in the next year, down from a high of 53% a year ago.

CEOs' expectations for profitability and revenue remain stable. The highest proportion in two years (60%) expect increased revenues in the year ahead, while 46% project increased profits in the next 12 months. The key factors driving expectations for increased profitability include cost-saving measures (51%), cost efficiencies based on increased volumes (48%), and price increases (43%). Only 9% reported a decrease in input costs.

Succession planning is top-of-mind for CEOs, with 36% reporting that they are currently creating succession plans. Of these, 15% have already identified their successor, and 20% have identified successors for key leadership positions within their company. When asked about plans for the leadership team this year, the majority of CEOs are investing in development (59%), promoting team members (42%), enhancing succession planning (41%), reorganizing leadership (35%), recruiting for leadership positions (31%), modifying compensation (27%), and replacing team members (20%).

The full results for the Q1 2024 Vistage CEO Confidence Index can be found at vistage.com/ceoindex.
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