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Portfolio > Economy & Markets

Corporate Directors Cautiously Optimistic on Economic Growth

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The National Association of Corporate Directors offered a meandering and milquetoast assessment of the economy and where it’s headed, reflecting the overall fits and starts markets have experienced since the official end of the economic crisis.

Beginning with a review of the levels of first-quarter versus second-quarter optimism in 2011 and 2012, the association says its cautious optimism is “fortified by peer indices.” The Conference Board’s Consumer Confidence Index has risen for the last three months, it notes, reaching 87.3—a height not seen since 2008. Similarly, TCB’s CEO Confidence Index went from a Q1 score of 54 to 62 in Q2.

“Still, perceptions that the economic recovery will collapse [are] still at the forefront of many minds,” the NACD noted. “During the time the BCI survey was in the field, Federal Reserve Chairman Ben Bernanke’s statement that the Federal Reserve’s program of quantitative easing may eventually lessen caused a short shock in the markets.”

The market shock may have been reflected in the boardroom’s short-term confidence score. While looking ahead three months respondents demonstrated hesitancy by producing a score of 53, this exact same score was produced when respondents reflected on the prior three months’ economic conditions, according to the association.

Confidence in the long-term state of the economy has steadied their outlook. Directors rated their economic confidence in the next year with a score of 64.1. In prior years, after Q1, this measure has typically dropped at least 3.5 points. This quarter, however, the decline was only 0.9, potentially revealing an increased emphasis on the long term. When asked about current conditions as compared to one year ago, directors responded with an optimistic score of 66.

The market’s steady growth appears to have translated into a similar outlook with regard to hiring practices. Thirty-four percent of respondents said they expected to increase the workforce in the next three months. Thirty-two percent made the same claim last quarter. The percentage of those who believe their company’s hiring practices will contract or remain the same in the next quarter has decreased to 11.5% and 54.1%, respectively.

Check out Wal-Mart’s Troubles May Be Canary in a Coal Mine by Ben Warwick on ThinkAdvisor.


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