Wall Street Journal/Vistage Small Business CEO Survey: Confidence reaches record levels

Economic optimism among small-business CEOs has reached peak levels, according to the latest results from the Wall Street Journal/Vistage Small Business CEO survey.

The December 2017 survey, which had 740 respondents, measured the CEO Confidence Index at 117.3. This is the highest level ever recorded by the survey since it began in 2012.

Expectations about the passage of U.S. tax reform played a role in this increase, notes Dr. Richard Curtin of the University of Michigan, who analyzed the survey results. “Although the December survey was completed before the final passage of the tax reform legislation, it was CEO anticipation of its passage that prompted the gain in confidence,” he explains.

However, most CEOs responding to the survey said that the tax bill wouldn’t change how they ran their businesses. Only 24% said that they planned to change the structure or operation of their businesses in response to the legislation.

The December 2017 survey had other notable and, in some cases, record-breaking results. Below, a summary of those results.

Small firms plan to increase hiring and investments

In the December 2017 survey, the majority of small-business CEOs (72%) said that they were planning to increase the total number of employees at their firms in 2018. This is the highest proportion ever recorded by the survey.

In addition, one-quarter of CEOs (25%) said that their employee counts would stay the same, while 3% said they would decrease.

CEOs reported using a variety of different strategies to manage difficulties with hiring. These strategies included boosting wages (30%), adding employee benefits (17%) and developing their existing workforce (34%).

More than half (52%) of small-business CEOs said they planned to increase spending on fixed business investments in 2018, compared to 49% last month and 48% one year ago. Forty-one percent said that their fixed investment expenditures would stay the same.

Again, this was a record for the survey. “Firms expressed the most aggressive planned expansion in investment spending ever recorded and the largest planned increase in the number of employees,” says Curtin. “The recent surge in planned increases in employment directly reflects tax reforms, as regulatory changes have been ongoing throughout the past year.”

CEO anticipate increased revenues and profits in 2018

Looking ahead, 83% of small-business CEOs said that they expected their firms’ revenues to increase in 2018. This percentage ties the five-year peak of 83% recorded in August 2017. Only 3% of CEOs said they expected that their firms’ total revenues would decline, which is the lowest number every recorded.

Profit expectations were similarly high. About two-thirds (66%) of CEOs said they expected profits at their firms to increase in the year ahead. Again, this is the highest percentage ever recorded by the survey.

“These planned changes are as good as could be expected, even if the initial enthusiasm is tempered by the actual decisions of firms,” says Curtin.

Small firms expect continued economic growth

More than half (65%) of small business CEOs said in December that they believed economic conditions in the United States had recently improved, by contrast to 57% one month prior and 43% one year ago. Less than one-third (31%) of CEOs said they thought that economic conditions were about the same, while only 4% said that they thought they had worsened.

When asked about expectations for the U.S. economy the next 12 months, 44% of small-business CEOs said they anticipated continued gains, compared to 37% last month and 60% recorded in January 2017. In addition, 43% of CEOs said that they expected that economic conditions in the United States would stay about the same in 2018. Only 11% anticipated that the economy would worsen.

“These small expected gains in the national economy stand in sharp contrast to the much-larger gains expected by CEOs within their firms in the year ahead,” notes Curtin. “Growth prospects for the national economy have improved over the recent lows, but have remained somewhat less favorable than last December.”

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