Wall Street Journal/Vistage Small Business CEO Survey: CEO optimism continues to increase

Economic optimism recorded a new peak — for the second consecutive month — in the January 2017 edition of the Wall Street Journal/Vistage Small Business CEO Survey.

The Wall Street Journal/Vistage Small Business CEO Confidence reached 120.5 in January 2018, a three-point increase from last month’s 117.3. This is the highest level ever recorded by the survey, which began in 2012.

“The recent peaks in optimism were propelled by a much stronger economy, as well as by the recent passage of the tax reform legislation,” said Dr. Richard Curtin of the University of Michigan, who analyzed the survey results. “Small firms anticipate a strong economic environment that provides opportunities for expansion. They also expect to significantly increase the amount of capital and labor to more fully participate in that expansion, and expect record increases in revenues and profits to help finance the expansion in their business.”

Other highlights from the survey, which had 738 respondents, include the following.

Economic policies improve business prospects

More than half of small-business CEOs (52%) said that current economic policies had improved prospects for their business, compared to 42% last month and 48% one year ago. Similar to last month, this positive assessment can be attributed to tax reform, noted Curtin. These changes “are expected to have a significant impact on small firms,” he said.

Small-business CEOs plan to use their tax savings in a number of different ways. These include investing in their own business (41%), taking more profits (21%), expanding into new areas (12%) and boosting wages (10%).

However, the majority of CEOs (72%) said that they will not change how their business is structured as a result of the tax bill.

CEOs perceive a stronger economy

In the January survey, the majority of small-business CEOs (70%) said that they felt the economy had improved. This is markedly higher than the 51% reported three months ago, and also the highest level recorded since 2012.

Prospects for the future were similarly optimistic. Fifty-four percent of CEOs said that they expected the economy to improve in the next 12 months, compared to 34% three months ago. However, this is still lower than the 60% peak recorded one year ago.

Revenue and profits expected to rise

In terms of their own businesses, 83% of CEOs said that they expected revenue growth to continue in the year ahead. This is equal to last month’s peak level. In addition, 69% of CEOs said that they anticipated their profits to increase. This is the highest level ever recorded by the survey.

Again, the new tax legislation appears to have played a role in these results. “Given the unchanged expectations for revenues, increased profit expectations were likely the result of the recently passed tax reforms,” said Curtin.

Plans for expansion continue

More than half of CEOs (52%) surveyed said they planned to increase investment expenditures in the next 12 months, which is equal to the peak level recorded last month. Another 41% said that their investments would remain the same. Similarly, 70% reported that they planned to expand their workforce, which is similar to last month’s peak of 72%. Only 2% of CEOs said they planned to decrease the size of their workforce.

“While business expansion through capital and labor remained at peak levels, CEO assessments of their own finances — revenues and profits — as well as both the current and expected conditions of the economy, have all reached the highest levels since the survey first began in 2012,” said Curtin.

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