Execs' confidence in economy rises

A study shows that executives' confidence in economic conditions has risen for the second consecutive quarter.
Written by ZDNET Editors, Contributor on
For the second quarter in a row, executives' overall confidence in economic conditions has risen, and hiring plans are robust, especially at the smallest companies, according to the latest McKinsey Quarterly global survey. Even so, the overall economic outlook six months out is a bit less positive.

As a whole, this survey reflects a fairly positive steady state. More executives plan to change the size of the workforce over the next six months than had plans to change it six months ago, with a bigger bump in hiring: 44 percent now (compared with 35 percent then) say they plan to increase their workforce, while 20 percent (compared with 18 percent) say they plan to decrease it.

Notably, the smallest companies in the survey are the most enthusiastic about hiring: 53 percent of companies with annual revenue below $10 million plan to hire, versus 31 percent of companies with $30 billion or more in revenues. These small companies have become increasingly likely to hire over the past six months. The differences are even more striking among the executives who plan to decrease the size of their workforce: 32 percent of those at the largest companies plan to do so, as opposed to only 5 percent of those at the smallest. What's more, C-level executives (CEOs, CFOs, and so forth) are more optimistic than other executives are about increasing the size of the workforce.

Executives in Europe are the most likely to be planning a decrease: a full quarter of them say that they are. The ongoing political battles in Europe over workers' rights and social taxation likely stem from the same underlying economic shifts that are causing many European executives to reduce the size of the workforce.

Confidence among executives in China bounced back in the past quarter. After a notable drop in December 2005, executives there are once again as positive as the global average about the current condition of their industries, and their confidence in the country's economy has also increased dramatically. China is the only country where executives believe conditions will be better in six months, either globally or in their own country and industries. At the industry level, most executives around the world expect conditions to remain at the same, fairly positive level, but broader economic conditions are generally expected to falter slightly. Executives in developed countries in Asia and the Pacific expect the biggest drop.

The McKinsey Quarterly conducted the survey in March 2006 and received 3,470 responses from a worldwide representative sample of business executives, 44 percent of whom are CEOs or other C-level executives.

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