CEOs remain optimistic about prospects for the economy as well as the outlook for their own firm’s performance in the midst of persistent economic and political uncertainties. The Vistage CEO Confidence Index was 105.1 in the 1st quarter 2012 survey, up from 98.8 in Q4 and 83.5 in Q3 of last year. Confidence is at its highest level since 105.2 was recorded at the start of 2011. Expected economic gains have prompted CEOs to continue to slowly expand employment in anticipation of higher sales; nonetheless, 84% of the CEOs surveyed said they’ve learned to be more productive with fewer employees. The Q1 2012 results reflect the sentiments of 1,854 small business CEOs surveyed from March 5-16, 2012.

Also notable in the Q1 survey is that nearly two-thirds of all CEOs believe that the top 3 economic priorities for whoever wins the Presidential election should be the federal deficit/national debt, health care, and entitlement programs (in that order). Rafael Pastor, Chairman of the Board and CEO of Vistage International, said: “While CEOs plan to increase hiring, they have adapted their companies to be productive with fewer employees and do not expect employment to return to pre-recession levels anytime soon. They do, however, see the President’s job, whoever he may be, to deal with these fiscal and policy challenges on which the health and growth of our nation’s enterprises and economy depend.”

Commenting on the survey results, University of Michigan’s Dr. Richard Curtin said, “The overall improvement mirrors gains made a year ago, which began to fade as gas prices rose. The same retreat could again be sparked by rising gas prices; however, unless other negative events occur or national gas prices rise significantly above $4, it is unlikely to affect the otherwise modest pace of economic growth that firms anticipate. While firms now have the financial legs to sustain growth, the long devastating downturn has made firms much more cautious about both the economic and political climates.”

Q1 2012 SURVEY HIGHLIGHTS

Durable Recovery Expected. Six-in-ten CEOs thought the economy had improved in the latest survey, three-times the level recorded last summer and the second highest percentage in seven years. Just 5% thought the economy had worsened during the past year, barely above the all-time low of 4% set in 2004. Importantly, the majority of CEOs believe that recent economic gains signal a durable and lasting recovery. Just 7% expected the economy to worsen during the year ahead. While CEOs anticipate positive GDP growth, they expect the rate of growth to be modest in the year ahead.

Hiring Plans at Five-year Peak. Net increases in employment were planned by 57% of all firms, the highest percentage since 2007. Gains in planned hiring were quite favorable last year as well, as hiring plans were already at twice the levels recorded at the 2008 lows. Importantly, like last year, firms plan to gradually increase hiring throughout the year ahead as business improves and uncertainty about the economy declines.

Investment Remains Strong. Planned investments in new plants and equipment remained largely unchanged at the improved levels recorded a year ago. New investments were planned by 45% in the 1st quarter of 2012, between the 42% recorded last quarter and last year’s 48%. This was well above the low of 27% recorded during the last recession, and much closer to the peak of 57% in the closing quarter of 2004. The continued commitment to invest underscores CEOs’ favorable outlook for a sustainable recovery.

Revenue Prospects Remain Bright. Revenue growth was expected by 75% of all firms in the 1st quarter survey, between the 73% in the prior quarter and last year’s 76%, but well above the recession low of 36%. Price increases for the goods or services they provide were anticipated by 42% of all firms, below the 49% recorded in last year’s 1st quarter survey, but well above the 28% at the start of 2010. Price gains were not sparked by higher demand but by efforts to manage rising costs, reported as a top challenge by firms.

Profit Outlook Improves. Higher profits were anticipated by 60% of all firms in the 1st quarter, up from 55% in the prior quarter and last year’s 57%. While the worst impact of the recession is over (just 9% anticipated declining profits, down from a peak of 36% three years ago), the expectation of higher profits is still below the peak of 74% in the 4th quarter of 2003 due to the expectation of modest economic growth.